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Lao People's Democratic Republic (Lao PDR) aims at graduating from least developed country status by 2026 and must increase the level of domestic financing for health. This paper examines how the government has prepared for the decline of external assistance and how donors have applied their transition approaches. Adapting a World Health Organization (WHO) framework, reflections and lessons were generated based on literature review, informal and formal consultations and focus group discussions with the Lao PDR government and development partners including budget impact discussion. The government has taken three approaches to transition from external to domestic funding: mobilizing domestic resources, increasing efficiency across programs and prioritization with a focus on strengthening primary health care (PHC). The government has increased gradually domestic government health expenditures as a share of the government expenditure from 2.6% in 2013 to 4.9% in 2019. The Ministry of Health has made efforts to design and roll out integrated service delivery of maternal, newborn, child, and adolescent health services, immunization and nutrition; integrated 13 information systems of key health programs into one single District Health Information Software 2; and prioritized PHC, which has led to shifting donors towards supporting PHC. Donors have revisited their aid policies designed to improve sustainability and ownership of the government. However, the government faces challenges in improving cross-programmatic efficiency at the operational level and in further increasing the health budget due to the economic crisis aggravated during Coronavirus disease 2019 (COVID-19). Working to implement donor transition strategies under the current economic situation and country challenges, calls into question the criteria used to evaluate transition. This criterion needs to include more appropriate indicators other than gross national income per capita, which does not reflect a country's readiness and capacity of the health system. There should be a more country-tailored strategy and support for considering the context and system-wide readiness during donor transition. [ABSTRACT FROM AUTHOR]