Private sector development (PSD) has taken on an increasingly prominent role in both the debates as well as budgets of international development cooperation in recent years. While the promotion of private sector activities in developing countries has for a long time been part of development cooperation strategies, in the past years there has been a shift towards a more proactive role of the private sector, defining it as a partner to address development challenges. The paper illustrates the growing prominence of the private sector in development cooperation and identifies reasons for this trend. It shows that PSD is not a “technical solution” but that there are different theoretical approaches to PSD that favour distinct policy measures, discussing the structuralist, neoclassical and neostructuralist approach. Finally, it  presents reflections on the relationship between current PSD strategies and sustainable economic and inclusive development.