This article compares two different institutional models--state-sponsored rural partnerships and community-based development trusts--for engaging and empowering local communities in area-based regeneration, using the Isle of Wight as a case study. Following a critical review of the literature on community governance, we evaluate the effectiveness of community involvement in the Island's small towns through a comparison of the performance of the two development trusts in Cowes and Ryde, on the one hand, and that of the partnerships established under the Market Towns Initiative in Sandown, Shanklin and Ventnor, on the other. We conclude that both models reflect the structuring effect of central, regional and local state steering of the Island's regeneration policy community but also that a "development trust effect" is observable in one location (Ryde), due to a capacity to stimulate new forms of community enterprise and to successfully alter political relationships within the local community. These findings support a "new institutionalist" account of community empowerment which emphasises the importance of contextual variation and locally specific processes of institutionalisation rather than the determining effect of institutional design per se.