INTRODUCTION: Throughout the 1990s, in response to funding deficits, out-of-pocket payment has grown as a share of total expenditure in countries in transition. A clear policy response to informal payments is, however, lacking. The current study explores informal payments in Bulgaria within a conceptual framework developed by triangulating information using a variety of methodologies. OBJECTIVE: To estimate the scale and determinants of informal payments in the health sector of Bulgaria and to identify who benefits, the characteristics and timing of payments, and the reasons for paying. DESIGN: Data were derived from a national representative survey of 1547 individuals complemented by in-depth interviews and focus groups with over 100 respondents, conducted in Bulgaria in 1997. Informal payments are defined as a monetary or in-kind transaction between a patient and a staff member for services that are officially free of charge in the state sector. RESULTS: Informal payments are relatively common in Bulgaria, especially if in the form of gifts. Informal cash payments are universal for operations and childbirth, clear-cut and life-threatening procedures, in hospitals or elite urban facilities or well-known physicians. Most gifts were given at the end of treatment and most cash payments-before or during treatment. Wealthier, better educated, younger respondents tend to pay more often, as a means of obtaining better-quality treatment in a de facto two-tier system. Since the transition, informal payments had become frequent, explicit, solicited by staff, increasingly in cash, and less affordable. Informal payments stem from the low income of staff, patients seeking better treatment; acute funding shortages; and from tradition. Attitudes to informal payments range from strongly negative (if solicited) to tolerant (if patient-initiated), depending on the circumstances. CONCLUSIONS: The study provides important new insights into the incidence and nature of informal payments in the health sector in Bulgaria. Payments were less than expected, very complex, organised in a chaotic, although adaptive, system, and relatively equitable. The timing of payment and the presence of compulsion is a key factor in distinguishing between informal payments given in gratitude or as a bribe, and the latter are seen as problematic, needing to be addressed. Paying informally appeared to be a product of socio-economic reality rather than culture and tradition. The study showed that the principle of comprehensive free coverage existing in Bulgaria until 1989 has been significantly eroded. Initiating a public debate on informal payments is important in a health care reform process that purports to increase accountability.