Full text can be accessed at http://www.smmeresearch.co.za/SMME%20Research%20General/Reports/Stimulating%20SME%20development.pdfThe present status of the Small and Medium Enterprise (SME) Sector in Tanzania is largely informal, under-performing and in need of considerable assistance to overcome barriers to its growth. There exist policies and programmes in Tanzania that have been developed to promote poverty reduction, economic growth, and SME development, including the Tanzania Development Vision 2025 and the National SME Development Policy. In this paper, the author has reviewed the key international and national policies and programmes that support the development of SMEs in Tanzania. In the attempt to remove some of the bottlenecks identified in the SME sector, the National Business/Technology Incubation Programme (NBIP) was established in the year 2003, as part of the implementation strategy of the National SME Development Policy that was launched in the same year. In this paper, the pilot project of the NBIP that is being implemented by the University of Dar es Salaam in Kibaha, Morogoro and Lushoto Districts is described. The paper gives a detailed review of incubator concepts and models. It also highlights achievements that have been obtained so far and the major challenges ahead. Based on this experience, the paper concludes that the business and technology incubation approach has a very high potential for contributing to attaininment of Vision 2025, in that it stimulates SME development that helps to achieve poverty reduction. A number of recommendations have been put forward in order to ensure that the implementation of the programme is on the right track and that a greater impact is obtained.