Anthropological understandings of development have often discussed development projects in terms of an extension of the state. Using the example of a participatory poverty reduction project in Laos, this article outlines how development schemes also have the potential to define areas of exception from state services. This project was understood by project officers as an example of a successful “participatory” project. Lao recipients, however, interpreted it in terms of the non-provision of state services, and thus as further evidence of governmental corruption and deceit. These residents—far from resisting the notion of development, or the extension of the state—emphasized largesse and provisioning as the hallmarks of a successful project and a legitimate state. Their forms of “everyday resistance” to the project focused on narratives demanding more incorporation with the state.