This study looks at the impact of liberalisation on the development and direction of the milk industry in Uganda. In the beginning, the changes brought benefits for those involved in the industry, including higher prices and increased employment opportunities, coupled with technology-related advances such as the introduction of modern processing and ultra-heat-treated (UHT) milk processing plants. In the long run however, liberalisation led to prices plummeting which resulted in milk being neither processed nor purchased; and some of the plants eventually closed. More widely, the study considers the economics and politics of the milk sub-sector and the relative influences of the state and private sectors on the industry. Finally, it analyses the institutional rigidities that are impeding the progress of the industry and its contribution to development in the southwest of the country.