What makes for a good life? The capabilities approach to this question has much to offer community psychology, particularly with respect to marginalized groups. Capabilities are freedoms to engage in valued social activities and roles—what people can do and be given both their capacities, and environmental opportunities and constraints. Economist Amartya Sen’s focus on freedoms and agency resonates with psychological calls for empowerment, and philosopher Martha Nussbaum’s specification of requirements for a life that is fully human provides an important guide for social programs. Community psychology’s focus on mediating structures has much to offer the capabilities approach. Parallels between capabilities, as enumerated by Nussbaum, and settings that foster positive youth development, as described in a National Research Council Report (Eccles and Gootman (Eds) in Community programs to promote youth development. National Academy Press, Washington, 2002) suggest extensions of the approach to children. Community psychologists can contribute to theory about ways to create and modify settings to enhance capabilities as well as empowerment and positive youth development. Finally, capabilities are difficult to measure, because they involve freedoms to choose but only choices actually made or enacted can be observed. The variation in activities or goals across members of a setting provides a measure of the capabilities that the setting fosters.