Administrators of nonprofit, human service organizations often discuss the need for new services. Knowledge about how to create this change is often a problem. Most of the literature on innovation is written about for-profit businesses. This research examines how nonprofits differ in the way they create innovation, the impact of leaders, and the traits of leaders that help create innovative services. This study utilizes a qualitative methodology, grounded theory, to develop themes that explain how this innovation occurs. The study was of seven human service agencies in Maryland that had innovative services such as: an adolescent fathers program, recycling of surplus building materials for use by low income people, and an urban literacy services model. Interviews and participant observations were used to conduct the research. The organizations studied fit into two categories, those with breakthrough innovations that transformed the agency and those with significant innovations that were ground breaking in nature but did not transform the entire organization's services. The study did find a difference between innovation here and in the business sector. For the majority of agencies in the study, the reason for innovation was to fulfill a vision of creating a better world for the people they served. A smaller group of the organizations acted based on the entrepreneurial "vision" of positioning the agency more effectively financially. Leadership was found to be an important factor in creating innovative services. The executive directors of the innovative organizations had certain traits: macro perspective, makes connections between ideas, looks ahead to the future, compassion for people, works very hard, action oriented, risk taker, persistence, creative or appreciates creativity, flexibility, respects staff and can give up power, sense of humor, and has strong networks outside of the organization. In addition, the traits of the executive director that increased the level of innovativeness were: level of energy and enthusiasm, ability to inspire others, and ability to translate the big picture into a vision and to then translate this into structures to ensure that changes happened. Management styles and gender of the directors were not related to creating innovative services by the organizations.