Core objectives for rural development support for the programming period 2007-2013 are: (1) improving the competitiveness of agriculture and forestry, (2) improving the environment and the countryside, and (3) improving the quality of life in rural areas and encouraging diversification of economic activity. Regulation (EC) No 1698/2005 includes a clearer targeting towards smaller and micro - enterprises to sustain job opportunity in rural areas. For this programming period a minimum funding of 10% of the total EU contribution has been withheld by the Council Regulation for measures concerning the quality of life and diversification of the rural economy outside agriculture and forestry. In spite of it the EU's Court of Auditors has concluded that Rural development policy in Europe is ineffective because continues to allow member states to adopt a predominantly sector approach with a primary focus on the agricultural sector. Taking into account the variety of regions in Europe and the different situations at national level, it is difficult to provide a single guideline to solve the problem. This paper deals with possible impact of Less Favorite Area payments on rural development. Special attention will be given to the role of LFA in maintenance of agricultural production that is desirable from environmental point of view and overcoming common rural problems like depopulation of rural areas. Using the case of Poland and Czech specific implementation of LFA payments rules will be compared (that to be done with respect to different rural structures between those two countries). Descriptive analysis of farm structures development patterns will be used to explain low economic effectiveness of LFA instrument. Similarly presentation of spatial distribution of LFA payment will be used to investigate its environmental effectiveness. Groups offarms that are major beneficiaries of LFA instrument are to be selected and compared with the objective one. It is expected that comparative analysis clarify the practical efficiency of LFA instrument in rural development. Finally, the conclusion concerned with future CAP is to be presented in respect of supporting regional rural development.