Like many other African countries, Tanzania has been implementing user fee policy in its health sector since the early 1990s. Accompanying user fee, mechanisms were designed that exempted the poor and vulnerable groups of the society from paying user charges. Although studies on the implementation of exemption policies in Tanzania exist, very few have documented the actual process of translating exemption policies into actions—the process of implementation. Drawing from policy analysis and implementation theories, this paper documents the implementation of the waiver (need-based exemptions) policy in Tanzania. The findings indicate that waiver systems, while potentially effective in principle, were ineffective in implementation. Lack of specification of criteria by which the poor could be identified made policy implementers at different levels to implement the policy in their own style. Low level of public awareness about the existence of waiver mechanisms hindered the poor to demand exemptions. Furthermore, fear of loss of revenue at the health facilities and ineffective enforcement mechanisms provided little incentives for local government leaders and health workers to communicate the policy to beneficiaries. It is concluded from this study that to better achieve the objectives of the pro-poor exemption policy, it is important to engage policy implementers more actively in the management and implementation of policies. Additionally, it is imperative to understand the behaviour and practices of policy implementers, especially district health managers, health workers and village and ward leaders, who may react negatively to new policies and implement the policies in ways contrary to what policy makers had intended.