Hungary can benefit from the resources of the European Union’s Structural Funds, inter alia the European Agricultural Guidance and Guarantee Fund (EAGGF) from 1st January 2004. However the preparation has started much earlier, in 2000. Nowadays, the use of the Structural Funds within the field of rural development is progressing well, and simultaneously the phasing-in for the next budgetary period has already been started. Substantial changes will be made to the financial mechanism of rural development in the 2007-2013 period. This field will receive much greater emphasis due to its separation from the structural funds and the creation of its own financing mechanism: the European Agricultural Fund for Rural Development (EAFRD). This single fund will resolve the problem of the previous periods, namely the fragmented system of providing support to rural development. The newly established EAFRD also implies some challenges to be faced by Member States, including Hungary. These challenges mainly derive from the current regulation of rural development, which is based on the Structural Funds. The challenges affect the following fields: strategic planning, establishment of the institutional background, and the operation of the monitoring system. National systems related to EAFRD need to be established with the fewest possible changes in comparison to the Structural Funds. As part of the preparations for the EAFRD the national strategy of financing rural development, i.e. the National Agricultural and Rural Development Strategy for 2007-2013 has been developed and published for partnership consultation. This strategy in its present form serves as a good basis for starting co-operation in the planning phase, however, it also raises many questions that need to be discussed. The dual objective of the present study is, firstly, to highlight the challenges Hungary has to face during the introduction of the new financial mechanism for rural development and to provide alternative solutions for the questions raised. Secondly it seeks to point out the weaknesses of the national strategy for rural development by analysing the document from the viewpoints of sustainability, harmonisation with other financing instruments, confusion of indicators, and supporting institutional infrastructure.