In spite of many initiatives to set up community or farmer-group-based seed production, there is little empirical evidence about the group functioning in producing and marketing quality seed. This article therefore aims to contribute to better understanding of the process and practice of seed potato cooperatives’ formation and operation in Chencha, Ethiopia. Our study specifically focused on why and how farmer groups organize, produce and market quality seed potato. We collected primary data from two seed potato cooperatives in three phases through interviews, focus group discussions, and field assessment and store inventories on bacterial wilt incidence. We found that the support to the establishing of the two seed potato cooperatives focused more on improving the members’ seed potato production capacity and less on building good governance in the seed chain. The experiences showed the tensions between prescriptive rules, collective action and individual interests which made it very hard to maintain quality seed standards and friendship at the same time. In general, the root of having weak seed cooperatives may not be the lack of intent towards building durable farmer groups. Rather, development practitioners did not take the set-up of strong farmer groups as an evolving process, which continually engages in diagnosis and responds to the emerging social as well as material challenges. The set-up of farmer-group-based seed production, therefore, needs to shift from ‘standard production models’ to an evolving model: an open and flexible model guided by trials, challenges and existing socio-technical and institutional realities.