Guinea-Bissau is a small country by size, yet is well-known for chaos. The country has always been affected by political instability marked by constant coup d’états and civil upheavals. This paper investigated the historical relationship between democratization process and good governance in Guinea-Bissau. The paper analysed the challenges experienced from when the country was a one-party state to when it became a multi-party democracy. The paper found that politicians used government institutions and abused power for their personal benefits. In order to restore sanity via democratization in Guinea Bissau, it is recommended that an effective system of governance which is capable of combating poverty and promoting community development, be installed by the people.