The paper deals with two related issues that are important for Serbia’s development: firstly, development prospects in agriculture and rural areas and, secondly, harmonization of rural development with the European integration process. The European Union market offers great export opportunities for the Serbian agriculture, the status of candidate country provide a number of benefits and support, but results will depend on success in improving two key determinants of competitiveness: productivity and quality. The present situation in rural areas is a result of earlier industrialization and urbanization, on the one hand, and of the transition process on the other. Its main characteristics are: depopulation, ageing of rural population, unbalanced regional development, and income disparity. Integral development of rural areas should be based on the following elements: multifunctional agriculture, diversification of economic activities in rural environment, rural and eco tourism, organic food production, small and medium-sized enterprises, and cooperation between small and medium producers. Such a development will lead to improved demographic, social, and income convergence.