Despite substantial public expenditure from domestic and international sources on free-to-user agricultural extension services in Bangladesh, there is a lag between the availability and application of seed technologies.  Besides the slow pace of diffusion of newly generated modern varieties (MVs), there exist wide gaps between potential and achieved yields at the farm level.  This study aims to assess the performance of Bangladeshi research and extension (R&E) institutions in disseminating new rice MVs to end-users, and to identify factors affecting farm-level diffusion of the disseminated MVs.  The study also examines the relationship between users’ technological knowledge and yields in the case of a new T. <i>Aman</i> season rice MV, BR32. The results suggest that the efficiency of the extension services was associated with the allocation of project funds between farm-level dissemination activities and overheads costs, and with the timing of project implementation.  The presence of many divisions and administrative levels in the technology transfer system appears to be responsible for high overheads, while farm-level diffusion of BR32 was delayed for 4 years after its release due to the late start of project-funded dissemination activities.  The rate of MV diffusion was restricted by seed scarcity, deficiencies in technical knowledge transfer, and some undesirable technology attributes.  The reasons for the seed crisis were:  i) the low amounts supplied by the public parastatal agency whose capacity was found to be under-utilized, ii) the lack of effective distributional channels for farmer-produced seeds, iii) the lack of farmer access to information about seed sources and demonstration sites, and iv) the low involvement of NGOs and the private sector.  The average and marginal costs of BR32 dissemination would have been much lower if seed and technical knowledge could have been delivered more according to farmers’ demand.