Objectives. We assessed the influence of changes in primary care and hospital supply on rates of ambulatory care–sensitive (ACS) hospitalizations among adults in Brazil. Methods. We aggregated data on nearly 60 million public sector hospitalizations between 1999 and 2007 to Brazil’s 558 microregions. We modeled adult ACS hospitalization rates as a function of area-level socioeconomic factors, health services supply, Family Health Program (FHP) availability, and health needs by using dynamic panel estimation techniques to control for endogenous explanatory variables. Results. The ACS hospitalization rates declined by more than 5% annually. When we controlled for other factors, FHP availability was associated with lower ACS hospitalization rates, whereas private or nonprofit hospital beds were associated with higher rates. Areas with highest predicted ACS hospitalization rates were those with the highest private or nonprofit hospital bed supply and with low (<25%) FHP coverage. The lowest predicted rates were seen for áreas with high (>75%) FHP coverage and very few private or nonprofit hospital beds. Conclusions. These results highlight the contribution of the FHP to improved health system performance and reflect the complexity of the health reform processes under way in Brazil.