In view of the market failures and the state failures inherent in providing agricultural extension, community-based approaches, which involve farmers' groups, have gained increasing importance in recent years as a third way to provide this service. The paper discusses the conceptual underpinnings of community-based extension approaches, highlights theoretical and practical challenges inherent in their design, and assesses the evidence available so far on their performance. The paper reviews both quantitative and qualitative studies, focusing on three examples that contain important elements of community-based extension: the National Agricultural Advisory Services program of Uganda, the agricultural technology management agency model of India, and the farmer field school approach. The review finds that in the rather few cases where performance has been relatively carefully studied, elite capture was identified as a major constraint. Other challenges that empirical studies found include a limited availability of competent service providers, deep-seated cultural attitudes that prevent an effective empowerment of farmers, and difficulties in implementing farmers' control of service providers' contracts. The paper concludes that, just as for the state and the market, communities can also fail in extension delivery. Hence, the challenge for innovative approaches in agricultural extension is to identify systems that use the potential of the state, the market, and communities to create checks and balances to overcome the failures inherent in all of them.