Background: Mounting evidence linking aspects of social capital to health and wellbeing outcomes, in particular to reducing health inequities, has led to intense interest in social capital theory within public health in recent decades. As a result, governments internationally are designing interventions to improve health and wellbeing by addressing levels of social capital in communities. The application of theory to practice is uneven, however, reflecting differing views on the pathways between social capital and health, and divergent theories about social capital itself. Unreliable implementation may restrict the potential to contribute to health equity by this means, yet to date there has been limited investigation of how the theory is interpreted at the level of policy and then translated into practice. Methods. The paper outlines a collaborative research project designed to address this knowledge deficit in order to inform more effective implementation. Undertaken in partnership with government departments, the study explored the application of social capital theory in programs designed to promote health and wellbeing in Adelaide, South Australia. It comprised three case studies of community-based practice, employing qualitative interviews and focus groups with community participants, practitioners, program managers and policy makers, to examine the ways in which the concept was interpreted and operationalized and identify the factors influencing success. These key lessons informed the development of practical resources comprising a guide for practitioners and briefing for policy makers. Results: Overall the study showed that effective community projects can contribute to population health and wellbeing and reducing health inequities. Of specific relevance to this paper, however, is the finding that community projects rely for their effectiveness on a broader commitment expressed through policies and frameworks at the highest level of government decision making. In particular this relationship requires long term vision, endorsement for cross-sectoral work, well-developed relationships and theoretical and practical knowledge. Conclusions: Attention to the practical application of social capital theory shows that community projects require structural support in their efforts to improve health and wellbeing and reduce health inequities. Sound community development techniques are essential but do not operate independently from frameworks and policies at the highest levels of government. Recognition of the interdependence of policy and practice will enable government to achieve these goals more effectively.