In the past three decades, India has received considerable external assistance for the health sector. The paper documents the externally funded programmes, projects, and activities in the health sector in India. The paper examines the extent of utilisation of the external funds in this sector and provides a brief description of the problems associated with the externally funded projects. The paper also indicates the role of donors in reshaping health policies and in improving domestic resource mobilisation for the health sector in the country. Further, continuing external assistance for the health sector in India will largely depend on the efficient utilisation of funds as well as on its capacity to absorb increased donor funding.