BACKGROUND: In Ecuador, indigenous women have poorer maternal health outcomes and access to maternity services. This is partly due to cultural barriers. A hospital in Ecuador implemented the Vertical Birth (VB) policy to address such inequities by adapting services to the local culture. This included conducting upright deliveries, introducing Traditional Birth Attendants (TBAs) and making physical adaptations to hospital facilities. METHODS: Using qualitative methods, we studied the VB policy implementation in an Ecuadorian hospital to analyse the factors that affect effective implementation of intercultural health policies at the local level. We collected data through observation, in-depth interviews, a focus group discussion, and documentation review. We conducted 46 interviews with healthcare workers, managers, TBAs, key informants and policy-makers involved in maternal health. Data analysis was guided by grounded theory and drew heavily on concepts of "street-level bureaucracy" to interpret policy implementation. RESULTS: The VB policy was highly controversial; actors' values (including concerns over patient safety) motivated their support or opposition to the Vertical Birth policy. For those who supported the policy, managers, policy-makers, indigenous actors and a minority of healthcare workers supported the policy, it was critical to address ethnic discrimination to improve indigenous women's access to the health service. Most healthcare workers initially resisted the policy because they believed vertical births led to poorer clinical outcomes and because they resented working alongside TBAs. Healthcare workers developed coping strategies and effectively modified the policy. Managers accepted these as a compromise to enable implementation. CONCLUSIONS: Although contentious, intercultural health policies such as the VB policy have the potential to improve maternity services and access for indigenous women. Evidence-base medicine should be used as a lever to facilitate the dialogue between healthcare workers and TBAs and to promote best practice and patient safety. Actors' values influenced policy implementation; policy implementation resulted from an ongoing negotiation between healthcare workers and managers.