Summary Background Evidence about the best methods with which to accelerate progress towards achieving the Millennium Development Goals is urgently needed. We assessed the effect of performance-based payment of health-care providers (payment for performance; P4P) on use and quality of child and maternal care services in health-care facilities in Rwanda. Methods 166 facilities were randomly assigned at the district level either to begin P4P funding between June, 2006, and October, 2006 (intervention group; n=80), or to continue with the traditional input-based funding until 23 months after study baseline (control group; n=86). Randomisation was done by coin toss. We surveyed facilities and 2158 households at baseline and after 23 months. The main outcome measures were prenatal care visits and institutional deliveries, quality of prenatal care, and child preventive care visits and immunisation. We isolated the incentive effect from the resource effect by increasing comparison facilities' input-based budgets by the average P4P payments made to the treatment facilities. We estimated a multivariate regression specification of the difference-in-difference model in which an individual's outcome is regressed against a dummy variable, indicating whether the facility received P4P that year, a facility-fixed effect, a year indicator, and a series of individual and household characteristics. Findings Our model estimated that facilities in the intervention group had a 23% increase in the number of institutional deliveries and increases in the number of preventive care visits by children aged 23 months or younger (56%) and aged between 24 months and 59 months (132%). No improvements were seen in the number of women completing four prenatal care visits or of children receiving full immunisation schedules. We also estimate an increase of 0·157 standard deviations (95% CI 0·026–0·289) in prenatal quality as measured by compliance with Rwandan prenatal care clinical practice guidelines. Interpretation The P4P scheme in Rwanda had the greatest effect on those services that had the highest payment rates and needed the least effort from the service provider. P4P financial performance incentives can improve both the use and quality of maternal and child health services, and could be a useful intervention to accelerate progress towards Millennium Development Goals for maternal and child health. Funding World Bank's Bank-Netherlands Partnership Program and Spanish Impact Evaluation Fund, the British Economic and Social Research Council, Government of Rwanda, and Global Development Network.