Over the past two decades, there has been an explosion in the number of civil society organizations in Kenya. The rapid increase has been as result of development gaps left by the government, which needs to be filled; significantly as well there has been increased competition for the scarce donor funds among Civil Society Organizations (CSOs) which donors prefers currently to be utilized on intangible projects like capacity building, while on the other hand the community prefer physical projects like construction of school which answers their needs directly. The study sought to establish the effect of organizational capacity building on community development. The study was based on systems theory by Miller and Rice (1967). The study adopted the Ex Post facto research design and incorporated research instruments such as questionnaires, interviews, observations and focus group discussions in data collection among the samples of 198 respondents selected through simple random and stratified sampling. The study established that; firstly, there are two forms of organisational capacity building secondly, training has a positive impact on community development and thirdly, community engages in monitoring and evaluation fourthly, CSO’s have attained their objectives to some extent. The study concluded that, CSOs offer Civic education, training, and engages in advocacy and that CSOs are dependent on donors and that is why they to have a weak financial base and are not self sustaining. The study recommended that CSOs should diversify on their sources of funds and review their systems and structures.