This article explores the importance of and value added by applying the capability approach to strategize, design, monitor or evaluate development initiatives, by operationalizing this agency-oriented (participatory) and opportunity-based perspective and by widening standard methods to deal with new informational spaces. In the first part of the paper a dynamic analytical framework on capabilities expansion/reduction processes—which places at the central stage the opportunity gaps between valuable community functionings and individual capability sets—is presented. These gaps represent the policy area where tailored and appropriate place-specific and people-centred development initiatives can entail the maximum expansion of real freedoms. Then, on the basis of this framework, the paper presents an original participatory methodology—the “O-Gap Analysis”—which can complement standard methods to provide systematized assessments of capabilities within communities to inform policy actions. An empirical case study is also discussed, analysing the application of this methodological procedure regarding a community-based rehabilitation project in Uganda. Applying the capability approach policy interventions cannot be necessarily unique for all individuals or social groups experiencing opportunity gaps for what they have reason to value, as different barriers or mix of barriers and conversion factors, values, desires and aspiration call for tailored people-centred development initiatives. [ABSTRACT FROM AUTHOR]