Recent reproductive health surveys show that the fertility rate in Paraguay decreased precipitously from 4.3 lifetime births per woman in 1995–98 to 2.9 births in 2001–04. In this study, we establish data consistency between the 1998 and 2004 surveys by comparing a series of cohort-specific period rates and use the Bongaarts framework of proximate determinants of fertility to demonstrate that an increase in the contraceptive prevalence rate (CPR) between 1998 and 2004 fully accounts for the fertility decline. Decomposition of rates shows that changes in group-specific CPRs explain a greater proportion of the change in the overall CPR than do changes in population composition by educational attainment, urban residence, region, and language spoken at home. Finally, we show that younger cohorts of women in 2004 reported ideal completed fertility desires of less than 2.9 births, suggesting that the fertility rate is likely to continue to decrease.