Summary  Social service contracting between governments and nonprofit organizations has received increasing popularity in China and has aroused enthusiasm in engaging nonprofit organizations in governance issues. This study argues that service contracting, driven by New Public Management tenets, may unexpectedly evolve toward collaborative governance (CG) by creating and consolidating necessary conditions of CG. Practices in Shanghai present evidence that governments and contracting nonprofits jointly make decisions, enforce regulatory functions, set rules, and improve community governance. The analysis shows that over time contracting may lead to generation of mutual trust, acquisition of governing resources, and consolidation of collaborative accountability. The evolutionary perspective provides not only a contingent way to develop CG in a context of heavy social control but also a theoretical link between New Public Management and New Public Governance. Copyright © 2017 John Wiley & Sons, Ltd.