Trained human resources are fundamental for well-functioning health systems, and the lack of health workers undermines public sector capacity to meet population health needs. While external brain drain from low and middle-income countries is well described, there is little understanding of the degree of internal brain drain, and how increases in health sector funding through global health initiatives may contribute to the outflow of health workers from the public sector to donor agencies, non-governmental organisations (NGOs), and the private sector.An observational study was conducted to estimate the degree of internal and external brain drain among Mozambican nationals qualifying from domestic and foreign medical schools between 1980-2006. Data were collected 26-months apart in 2008 and 2010, and included current employment status, employer, geographic location of employment, and main work duties.Of 723 qualifying physicians between 1980-2006, 95.9% (693) were working full-time, including 71.1% (493) as clinicians, 20.5% (142) as health system managers, and 6.9% (48) as researchers/professors. 25.5% (181) of the sample had left the public sector, of which 62.4% (113) continued working in-country and 37.6% (68) emigrated from Mozambique. Of those cases of internal migration, 66.4% (75) worked for NGOs, 21.2% (24) for donor agencies, and 12.4% (14) in the private sector. Annual incidence of physician migration was estimated to be 3.7%, predominately to work in the growing NGO sector. An estimated 36.3% (41/113) of internal migration cases had previously held senior-level management positions in the public sector.Internal migration is an important contributor to capital flight from the public sector, accounting for more cases of physician loss than external migration in Mozambique. Given the urgent need to strengthen public sector health systems, frank reflection by donors and NGOs is needed to assess how hiring practices may undermine the very systems they seek to strengthen.