The idea of direct payments for biodiversity conservation in developing countries has generated much debate. Despite substantial experience with related economic instruments in high-income countries such approaches are rare in tropical developing countries, where conservation action is most urgently needed. We explore current experience with the application of direct payments in developing countries through an extensive review and subsequent analysis of the efforts of Conservation International. Our review identifies a broad spectrum of possible direct payment contracts. However, we focus on those involving international conservation interests. Firstly, we develop a framework for the design of direct payment applications, addressing four major aspects: contractual arrangements, definition of conservation services, performance payments, and monitoring and enforcement systems. Secondly, we discuss implementation issues, highlighting the need to consider social factors such as participatory processes, property rights, local institutions and contract legitimacy. Finally, we discuss important considerations for future payment schemes. These include the need for social responsibility, as well as rigorous assessments of effectiveness. We conclude that direct payments show potential as an innovative tool for engaging local communities or resource users in conservation and as a mechanism for channelling global investments in biodiversity conservation services to site-based initiatives.