This study examined the influence of the Tertiary Education Endowment Fund on capacity building indicators in public universities in the South-West Zone of Nigeria. A descriptive survey research design was adopted, with a population comprising academic and administrative staff in public universities in the region. Using a multi-stage sampling technique, 360 respondents were selected, out of which 348 valid responses were analyzed. Data were collected using a researcher-developed instrument titled Tertiary Education Endowment Fund and Capacity Building Indicators Questionnaire (TEEF-CBIQ), which was validated by experts and yielded a reliability coefficient of 0.88 using Cronbach’s Alpha. Data were analyzed using mean and standard deviation for research questions, while ANOVA, regression, and Chi-square statistical tools were used to test the five null hypotheses at the 0.05 level of significance. The findings revealed that although the practical influence of the fund on capacity building indicators such as lecturers’ professional development, research capacity development, infrastructural growth, ICT development, and institutional effectiveness was generally low in magnitude, the statistical analyses showed significant relationships and effects across all dimensions. This indicates that the Tertiary Education Endowment Fund plays a significant but under-optimized role in strengthening capacity building in public universities. The study concludes that the effectiveness of the fund is largely constrained by governance weaknesses, delayed disbursement, poor monitoring systems, and weak institutional integration. It therefore recommends strengthened accountability mechanisms, strategic fund utilization frameworks, and policy-driven institutional planning to enhance the sustainable impact of the fund on university capacity development and academic system strengthening in Nigeria.