Provision of primary education for all children has long been seen as of great importance, at least in policy discussions, around the world and in Kenya. Since the introduction of free primary education, the Kenyan government has continued to invest heavily on the program for its sustainability and realization of the UN Millennium Development Goals and the Education for All goals. It is important to understand the extent to which this capitation grant has affected service delivery in primary schools. The purpose of the study was to investigate the effects of capitation grant on implementation of free primary education in Seme Sub-county, Kenya. The study reviewed various literatures on some past studies and assessed their contribution to the objectives of this study. The study used descriptive survey design to carry out the study with both qualitative and quantitative methodologies of collecting data. The study sample comprised of 86 head teachers, who were selected purposively and proportionately while 269 teachers were selected through simple random sampling technique. Teachers were given questionnaires, while head teachers were also interviewed. Both quantitative and qualitative data were obtained from these respondents. Quantitative data from questionnaires were analysed by descriptive statistics as well as Pearson correlation test with the help of SPSS version 22 to compute the data, while qualitative data were analysed thematically through content analysis in the thematic analysis. The study found that that over three quarters of the respondents confirmed that because of capitation grant, school dropout rate had dropped significantly. Improvement of the enrolment rate was also reported by majority of the respondents who strongly agreed with the statement. More than half of the respondents also confirmed that because of capitation grant, school retention rate has improved significantly. Pearson correlation test also showed a strong positive correlation between FPE capitation grant and pupils enrolment rate of the selected schools in Seme Sub-County, with r = 0.723 at P<0.05. On academic performance, the study revealed that the KCPE performance of pupils in Seme sub-county had been on the upward trend, since 2002, with the highest mean score and highest score achieved being 379 and 410 respectively, registered in the year 2014. The increasing performance could be traced to 2003 that was when the FPE capitation grant was incepted. Head teachers also reported during interview that introduction of capitation grant led to improved performance in KCPE. Pearson Correlation test also shows a strong positive correlation between capitation grant and KCPE performance of the selected schools in Seme sub-county, with r = 0.843 at P<0.05. The study recommends that the amount for capitation should be adjusted upwards to enable the schools offer conducive environment. Parents should be encouraged to supplement the school budget where necessary for smooth running of the school and together with the capitation grant, the school would afford adequately teaching and learning materials that would encourage learning and better academic performance. Further research should be done on management factors affecting proper utilization of capitation grant on implementation of free primary education.