The impact of payment-for-performance (P4P) schemes in the health sector has been documented, but there has been little attention to the distributional effects of P4P across health facilities. We examined the distribution of P4P payouts over time and assessed whether increased service coverage due to P4P differed across facilities in Tanzania. We used two service outcomes that improved due to P4P [facility-based deliveries and provision of antimalarials during antenatal care (ANC)], to also assess whether incentive design matters for performance inequalities. We used data from 150 facilities from intervention and comparison areas in January 2012 and 13 months later. Our primary data were gathered through facility survey and household survey, while data on performance payouts were obtained from the programme administrator. Descriptive inequality measures were used to examine the distribution of payouts across facility subgroups. Difference-in-differences regression analyses were used to identify P4P differential effects on the two service coverage outcomes across facility subgroups. We found that performance payouts were initially higher among higher-level facilities (hospitals and health centres) compared with dispensaries, among facilities with more medical commodities and among facilities serving wealthier populations, but these inequalities declined over time. P4P had greater effects on coverage of institutional deliveries among facilities with low baseline performance, serving middle wealth populations and located in rural areas. P4P effects on antimalarials provision during ANC was similar across facilities. Performance inequalities were influenced by the design of incentives and a range of facility characteristics; however, the nature of the service being targeted is also likely to have affected provider response. Further research is needed to examine in more detail the effects of incentive design on outcomes and researchers should be encouraged to report on design aspects in their evaluations of P4P and systematically monitor and report subgroup effects across providers.