The study on dynamics of labour demand in Punjab agriculture has revealed that between 1985-86 and 2006-07, the per-hectare labour use has declined by about 23 per cent; more so, in the case of dominant crops like wheat and paddy that have experienced large-scale mechanization. Wheat and paddy had together accounted for about 52 per cent of the gross cropped area in 1985-86, which further increased to 73 per cent in 2006-07. However, increase in labour use in cotton cultivation has been only marginal. The positive effect of agricultural growth on labour use has got neutralized due to the significant displacement of human labour by machines and also due to rising wage rates. The elasticity of labour use in agriculture has fallen drastically during the past two decades indicating little potential for absorption of additional labour in agriculture.