This paper looks at how a certain understanding of states is affecting the types of activities emphasised in state-building agendas. It proposes an approach to understanding states and their roles, drawing on ideas of institutions and their rules as a means of mediating power, and applies this to a discussion of two state-building initiatives at the subnational level in Afghanistan. It shows how resistance to attempts to impose bureaucratic rules, coupled with the international community’s failure to understand the role of states in mediating power, has contributed to the failure to date of interventions to reform local government. This has directly affected reconstruction and stability in Afghanistan.