The cultural and economic importance of paddy rice production for households in the lowlands of Lao PDR cannot be overstated. Annual rice production is viewed by households and the Government alike as an indicator of poverty and food security. Over the past decade the adoption of new technologies has resulted in productivity improvements in lowland rice systems, yet further gains are being sought to maintain national rice self-sufficiency. The Government of Laos has established optimistic yield targets for both the lowland rainfed and irrigated rice production systems. However, survey evidence shows that, despite the adoption of improved technologies, most rainfed farmers remain subsistence-oriented and there is a significant yield gap between the current situation and the proposed targets. The diversification of household livelihoods through wage migration has reduced farm labour availability and increased farm wages. At the same time, price fluctuations due to supply shocks and government responses have created a further disincentive to the intensification of rice production systems. An economic analysis of rainfed rice production suggests that given current conditions we are likely to continue to see the adoption of low-input, labour-efficient, and relatively stable rice production systems for most households, with small areas of high-input, commercially-oriented systems in favourable conditions. We argue that research and extension efforts should recognise this diversity of production systems and household livelihood strategies.