Bhutan has an effective and efficient environmental impact assessment and development approval system. However, as is the case in most countries, the focus of environmental protection is predominantly on "safeguarding". For sustainability goals to be reached, efforts need to go beyond compliance with standards and mitigation of adverse impacts, to identifying environmental sustainability as an objective of the development process. This realization became clear to the Royal Government of Bhutan in 2006, when it included a strong "environmental mainstreaming" requirement in the preparation guidelines for the 10th Five Year Plan. Since that time, the concept of environmental mainstreaming has quickly taken hold, and is a significant component of donor assistance to capacity development at different levels of government. However, policy innovation in this area has not followed a smooth path. This paper describes recent progress made in high-level environmental mainstreaming in Bhutan, and reflects on lessons learned. It also aims to provide ideas and guidance for other developing countries that are in a similar situation.