This article discusses and analyses the government strategy towards higher education in the Netherlands as it has been designed and implemented since the publication of an influential policy document in 1985. This strategy intends to be a significant break with the traditional government attitude of detailed planning and control. It tries to strengthen the autonomy of the higher education institutions and to enlarge their adaptability to the needs of society. In this article the government strategy is characterized as a combination of two fundamental mechanisms of coordination: planning and the market. It is argued that the strategy shows that the Dutch government tries to address both market and non-market failures. However, by doing so, it has created a mixed bag of policies and instruments, demonstrating that government has not yet abandoned its confidence in its own capacity to successfully steer the higher education system.