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The Orçamento Participativo (OP) or Participatory Budget is an innovative process to determine municipal investment, which was started in 1989 in 13 municipalities in Brazil. Amongst these, the city of Porto Alegre in the State of Rio Grande do Sul has been the most prominent, involving citizen participation through preparatory meetings, regional assemblies and municipal assemblies. OP has a place in development studies as a tool-kit to promote the strengthening of civil society and democracy, having been selected by the United Nations as a worldwide best practice in municipal finance and democratic interaction and applied to more than 20 cities worldwide. As successful as it has been, the OP faced risks in Porto Alegre which require amendments to modernize it and keep its spirit alive. This study analyzed the constraints and challenges that the Porto Alegre OP faced to become sustainable, and proposed a menu of reforms to address them. Using a mixture of social and economic tools, PADECO: (i) identifed the main challenges that OP faces and proposed reforms to address them; (ii) identified more inclusive and effective mechanisms to improve local governance and the quality of public service delivery; (iii) facilitated dialogue with relevant stakeholders to improve the sustainability of OP; (iv) assessed the fiscal, poverty and distribution impacts of OP through a comparision with a control group of municipalities in Brazil; and (v) disseminated the main findings and lessons learned to contribute to the debate in Brazil and the World Bank on decentralizationand participatory budgeting.