The focus of the paper is on the capabilities of various types and their effects on land resource utilization for achieving Tanzania towns’ objectives drawing empirical evidence from Kibaha and Chalinze. It is argued that small towns of Kibaha and Chalinze have set objectives which have to be attained through capabilities enhancement of various types in utilizing land. The existing capabilities are unfortunately limited causing the utilization of land resource by residents and other actors to be ineffective and inefficient. This has resulted in inadequate realization of the objectives set by the towns. In analyzing all those dynamics in detail the paper is divided into five sections, beginning with introduction in section one. It is followed by section two which is dealing with the methods for data collection and analysis. While section three focuses on theoretical framework, section four discusses the empirical results of the status of capabilities in various sectors linked with the manner land is utilized for achieving the objectives set in the towns. Section five is on the suggestions to enhance capabilities of residents and other actors for utilizing land productively in the two towns.