This study proposed a theory of community-based development based upon a case study of the Evangeline region of Prince Edward Island (Canada). Evangeline is a small Acadian community with an economy that is based upon an interrelated system of cooperatives. Since general theories do not provide compelling explanations of how the phenomenon of community-based development takes place in a particular situation, this study adopted an inductive approach. Using a tentative theoretical framework derived from the history of the region and from the community-based development research literature, the study investigated the actual formation process of four Evangeline cooperatives through interviews with the initiators, a review of relevant documents and participant observation by the first author. The framework developed in this study proposes that effective community-based development must include three essential elements: community consciousness; strategies of empowerment; and the establishment of supportive structures. Each of these elements has subcomponents that are essential for community-based development. For community consciousness, these are community attachments and a movement perspective; for empowering activities, these are involvement strategies and strategies of self-reliance; and for supportive structures, the subcomponents are community development organizations to mobilize community resources, and external government and non-government organizations responsive to community initiatives.