Performance-based payment (PBP) is increasingly advocated as a way to improve the performance of health systems in low-income countries. This study conducted a systematic review of the current literature on this topic and found that while it is a popular term, there was little consensus about the meaning or the use of the concept of PBP. Significant weaknesses in the current evidence base on the success of PBP initiatives were also found. The literature would be strengthened by multi-disciplinary case studies that present both the advantages and disadvantages of PBP, influential factors for success, and more details about the projects from which this evidence is drawn. Where possible, data from control facilities where PBP is not being implemented would be an important addition. This paper suggests a further agenda for research, including assessing optimal conditions for implementation of PBP schemes in less developed health systems, the impact of adopting measures of performance as targets, and the requirements for monitoring PBP adequately.