Context: The future of health care includes electronic health records (EHR) and Health Information Exchange (HIE) with the goal of creating a National Health Information Network. Efforts to date have been based in hospitals or large ambulatory care settings, with far less written about HIE in smaller primary care clinics. Objective: The goal of this project was to assess the benefits and barriers that influence the participation of primary care practices in community-wide HIE. Design: Clinics’ background data regarding practice composition and use of EHR/HIE was collected with an on-line questionnaire. On-site structured interviews with at least three key informants were conducted at each clinic. Interviews were audio-taped, transcribed and analyzed for themes by the researchers. Setting: Nine ambulatory clinics with fewer than 20 primary care physicians in three geographic regions of Minnesota. Participants: Six clinics were rural and three urban, all but one were not-for-profit, three were federally qualified health centers. Six clinics were using a purchased EHR, one had created a relational database system, and two were in the process of acquiring an EHR. Two clinics participated in a Regional Health Information Organization (RHIO). Key informants included clinic administrators, medical directors, nurse managers, IT support staff, and physician IT champions. Results: Clinics using EHR/HIE described improvements in timeliness of communication, quality of care, and patient data tracking. Strategic planning that involved staged implementation of EHR/HIE and having clinician champions who were knowledgeable about IT were important factors for success. Cost was a barrier, with several of the clinics overcoming this with federal and state funding mechanisms. Other barriers include political, liability and patient privacy challenges. Conclusions: HIE is developing by incremental steps within small practices. It is important to consider the successes and challenges faced by such practices when setting over-arching policies about HIE.