Improved water supply, sanitation and hygiene used in combination are effective at achieving better health for poor people in developing countries. However, donor policy has been dominated by interventions in water supply, at the expense of achieving the potential health benefits of improved sanitation and hygiene. Commitments recently made by the international community require greater emphasis on improved sanitation and hygiene and their impacts on health. This review assesses whether such a shift in emphasis is apparent in donor policy. It examines the prominence given to achieving better health in water supply and sanitation policies of three donors: the World Bank, the European Union and the Department for International Development of the British Government. It finds that health benefits are explicit and integral in recently updated policy documentation concerning water supply and sanitation. This has taken place in an environment focused on poverty reduction and demand-led, financially sustainable interventions. Mechanisms that have enabled donors to prioritise the health impacts in this environment are discussed, including adoption of an asset-based conceptualisation of poverty and a cross-sectoral approach.