Many donor agencies are recognizing the need to address the growing levels of urban poverty in Africa, Latin America and much of Asia. Many also acknowledge that they had under-estimated the scale of urban poverty. As they develop or expand programmes on poverty reduction in urban areas, there are many remarkable initiatives on whose experience they can draw. This paper reflects on the lessons from seven of these : three from Asia, three from Latin America and one from Africa. All these initiatives combined direct action by low-income groups themselves, working with local NGOs, with some support negotiated from one or more external agency in order to improve housing and living conditions, basic services and livelihoods. Each initiative sought to make limited funding go as far as possible- and most achieved partial or total cost recovery for some (or all) of their interventions. All used credit to allow low-income groups to spread the cost of capital investment over a number of years. These initiatives also changed the relationship between poor urban groups and local authorities, bringing about major benefits. However, official donors may find it difficult to fund initiatives such as these, especially through conventional project-cycle oriented funding for capital projects that is channelled through recipient governments. They may also find it difficult to fund initiatives that aim to change the policies and practices of local (or national) governments ; also to support initiatives that are multisectoral, relatively cheap and require long-term support because they are long-term processes rather than discrete projects. Initiatives that generate cost recovery may also present them with difficulties. Most official donors will need to develop new channels to support such initiatives - for instance through support for intermediary funds for community projects located within these cities.