While recovering from decades of conflict and trying to adjust to an incipient free market economy, public higher education in Afghanistan is currently confronted with rapidly increasing enrollment and inadequate government financing. The imbalance between high demand for and insufficient supply of higher education has led to a decrease in the quality of education and an urgent need to develop non-state sources of funding. Using Johnstone’s (1986) diversified funding model as the conceptual framework, this exploratory case study reports actors’ attitudes and perceptions of the financing policy options for Afghan public higher education and the impediments to introduce this model in Afghanistan. Data were collected from documents and semistructured interviews with Afghan administrators, politicians, instructors and students during four months in Kabul in 2008. The findings show that: a) the state has most likely reached the maximum financial contribution to public higher education and that little more can be expected; b) that the existing funding for this sub-sector is not managed well; c) that the current legal framework does not support expansion of the entrepreneurial activities that are developing at the higher education institutions; c) that the legal system does not provide incentives to develop Afghan national donor support; d) that the introduction of user fees, though currently under consideration, is confronted with significant technical impediments, and e) that the introduction of tuition is not on the agenda because the higher education institutions have found the introduction of “night school” as an alternative means that allows the charging of tuition under the guise of “extra” services. In light of the aggregated actors’ attitudes towards these funding options, this study identifies considerable legal, technical and political blockages that hinder the creation of a functioning diversified funding model. The findings indicate that one significant pre-requisite for any development of these new funding sources will be increased institutional autonomy. Without devolution in power from the centralized ministry to the institutions, the necessary incentives and mechanisms will probably be missing for the development of these alternative sources of funding.