OBJECTIVES: Reviewing the financial mechanisms for health system in developing countries is crucial especially when many developing countries are experiencing, or deciding to have a health reform, with special attention to the financing system. This paper is to present the impact of NHIF on performance of the Sudan Health System. METHODS: This is a descriptive and analytical study using secondary data collected by the NHIF and Federal Ministry of Health, Sudan. RESULTS: Since the Independence in 1956 till 1990, the Sudanese had enjoyed health care services free of charge. In 1990, according to the economical hardship and war, Sudan introduced a fee for all essential social services including primary education and health care. The introduction of the fee to an already poor society decreased access and did not improve quality in the public facilities. The for-profit private sector had been promoted to improve the health care quality. However, the equity issue was not on the policy agenda. To manage the social impact of privatization of health care, the government implemented a Social Health Insurance Corporation (lately Fund) in 1994, to protect people from the risk of the out of pocket payment, and to improve the quality of health care. The NHIF has come with promising results with regards to efficiency and equity. The coverage in 2007 had reached 25.5% of the targeted population, with administrative cost constituted only 10.7% and medical services of 64.5%.The users profile skewed towards the poor and marginalized groups. CONCLUSIONS: Although the implementation of the Social Health Insurance is recommended as a health financial mechanism for countries with better socio-economic indicators, Sudan NHIF no doubt has a significant role in improving the access and quality of health care, with very innovative methods in protecting the poor. The experience may be of use in many other developing countries.