Advanced approaches towards defense management, and the process of the ongoing force transformation in particular, rely to a great extent on Capabilities-Based Planning (CBP) to provide for robust response to a broad spectrum of threats and challenges. Our assumption is that CBP has considerable potential to enhance initiatives for security sector transformation. This paper outlines a planning framework, based on centralized planning and agency-based development of security sector capabilities. It links objectives, security ambitions, planning scenarios, tasks, required and affordable capabilities, and planning risks. The distribution of capabilities among security sector organizations accounts for their traditions, experience, and current roles, but focuses on cost effectiveness. The development of capabilities is subject to regular monitoring, assessment of gaps and risks, and coordinated decision making on corrective measures. Then, the paper presents possible levels of integration of the security sector. The conclusion is that coordinated capability development, with capabilities-based planning as its central feature, should be seen as the core process in security sector transformation.