Abstract Background In recent years, Performance Based Financing (PBF); a form of result based financing, has attracted a global attention in health systems in developing countries. PBF promotes autonomous health facilities, motivates and introduces financial incentives to motivate health facilities and health workers to attain pre-determined targets. To achieve this, The Tanzanian government through the Christian Social Services Commission initiated a PBF pilot project in Rungwe district, Mbeya region. Kilimanjaro Christian Medical Center was given the role of training health workers on PBF principles in Rungwe. The aim of this study was to explore health care providers’ perception on a three years training on PBF principles in a PBF pilot project at Rungwe District in Mbeya, Tanzania. Methods This was an explorative qualitative study, which took place at Rungwe PBF pilot area in October 2012. Twenty six (26) participants were purposively selected. Six took part in- depthinterviews (IDIs) and twenty (20) in the group discussions. Both the IDIs and the GDs explored the perceived benefit and challenges of implementing PBF in their workplace. Data were manually analyzed using content analysis approach. Results Overall informants had positive perspectives on PBF training. Most of the health facilities were able to implement some of the PBF concepts in their work places after the training, such as developing job descriptions for their staff, creating quarterly business plans for their facilities, costing for their services and entering service agreement with the government, improved record keeping, customer care and involving community as partners in running their facilities. The most common principle of paying individual performance bonuses was mentioned as a major challenge due to inadequate funding and poor design of Rungwe PBF pilot project. Conclusion Despite poor design and inadequate funding, our findings have shown some promising results after PBF training in the study area. The findings have highlighted the potential of PBF to act as leverage for initiating innovative and proactive actions, which may motivate health personnel performance and quality of care in the study setting with minimal support. However, key policy issues at the national level should be addressed in order to exploit this opportunity. Keywords Performance Based Financing, PBF pilot project, Rungwe, Tanzania