OBJECTIVES: The provision of smoke-free areas in restaurants has been a controversial issue; the restaurant industry largely opts for a self-regulation approach. This study aimed to examine the effectiveness of self-regulation as a strategy in meeting the industry's and customers' perceived needs. METHODS: Restaurateur and customer perspectives on the provision of smoke-free areas in restaurants were examined by survey among 365 restaurateurs and 1327 customers in New South Wales, Australia. RESULTS: Less than 2% of restaurants were totally smoke-free; 22% provided some smoke-free areas. Customers were much more likely than owners to think that smoke-free areas should be provided. Owners appeared to be unaware of customers' views about smoke-free areas in restaurants. CONCLUSIONS: Little evidence was found to support the effectiveness of the self-regulation policy adopted by the restaurant industry. Characteristics of restaurants and owners associated with the provision of smoke-free areas are presented and implications of the findings are discussed.