Many countries in Europe are now searching for new ways to engage citizens and involve the third sector in the provision and governance of social services in order to meet major demographical, political and economic challenges facing the welfare state in the 21st Century. Co-production provides a model for the mix of both public service agents and citizens who contribute to the provision of a public service. Citizen participation involves several different dimensions: economic, social, political and service specific. The extent of citizen participation varies between different providers of welfare services, as too does user and staff influence. Empirical materials from a recent study of childcare in Sweden will be used to illustrate these points. However, the role of citizens and the third sector also varies between countries and social sectors. Third sector providers facilitate citizen participation, while a glass ceiling for participation exists in municipal and for-profit providers. Moreover, co-production takes place in a political context, and can be crowded-in or crowded-out by public policy. These findings can contribute to the development of a new paradigm of participative democracy.