OBJECTIVES: In Uganda, the number of new acceptors of family planning (FP) services is still low, partly due to limited use of cost effective delivery approaches. Currently, FP is delivered through community based distribution (CBD) and facility based distribution (FBD).  However, FBD remains the preferred approach despite the effectiveness and low cost nature of CBDs. The objective of this study was to compare the cost effectiveness of facility and community based provision of FP by a non-government organization. METHODS: Cost effectiveness study was done using a providers’ perspective in an urban setting of Kampala. Cost data was collected by reviewing available accounting records and effectiveness in couple years of protection (CYP) was determined using client cards for the period January 2008 to December 2010. Both approaches were analyzed using Tree-Age Pro 2011, with the facility based  approach as the comparator. Cost effectiveness  was determined using a decision model based on the WHO recommended FP delivery procedures. Net Health Benefit analysis was performed and results were subjected to sensitivity analysis. RESULTS: CBDs had a lower cost effectiveness ratio of US $ 21.21 per CYP compared to US $ 37.17 per CYP for the FBD approach. Counseling rates were higher for CBDs with 95%, compared to 69% for FBDs. CBDs yielded` cost savings of US $ 39.43 for every CYP gained compared to FBDs. CONCLUSIONS: The CBD approach was more cost effective than FBDs in increasing FP use. Increasing community based provision of low cost FP methods and implants is an effective way of increasing FP use in poor urban settings.