This article reviews key conceptual issues related to the development of the rural non-farm economy (RNFE) in a transition context and analyses available empirical evidence on the role of RNFE during recovery from the transition recession. Growth in the RNFE in the transition countries took place during the recession transition, which shows that it may be distress driven, but the paper explores other factors which may be driving the RNFE. It looks at the RNFE in light of the factors driving income growth and inequality, i.e. endowments and institutions. It concludes that, although not uniform across transition countries, the RNFE should be seen as a component of a growth strategy rather than as a temporary “refuge” or survival one. The patterns of growth of the RNFE will closely follow those of general economic recovery as well as the developments in the agricultural sector itself.