This paper aims at explaining the role and importance of the evolution of institutions for sustainable agri-environments during the transition process by referring to examples of agri-environmental problems faced in Central and Eastern European countries. It is often stated that the replacement of institutional structures in post socialist countries would bring a unique opportunity to implement new policies and institutions needed to ensure that economic growth is environmentally sustainable. This idea stems from the assumption that the breakdown of the socialist system resembles that (of the Schumpeterian type) of creative destruction - a process that incessantly revolutionizes economic structures from within. However, not all kinds of institutions, especially at local level, can simply be implemented, and even more, not incessantly. Instead, they evolve as a response to ecosystem and social system characteristics, and this is a rather slow process. A central question therefore is whether the required institutional arrangements for achieving sustainability in the area of agri-environmental resource management can be built more easily in periods of transition as they fill institutional gaps, or whether processes of transition make institution building a more difficult and far more time consuming task than previously thought. Above all, we want to find out, how these two processes of institution building at different scales affect the sustainable management of resources such as water and biodiversity in agriculture? It will become clear that the agri-environmental problem areas faced during transition are complex and dynamic and require adequate institutions both by political design and from the grassroots, to be developed by the respective actors involved. Transition from centrally planned to pluralistic systems has to be considered as a particular and in some respect non-typical process of institutional change. Popular theories of institutional change do not necessarily apply. The privatisation experience from many CEE countries will serve as an example. Finally, we will provide some examples of missing or insufficient interaction between political actors or agencies and people in CEE countries. Substantial investments into social and human capital, particularly regarding informal institutions are needed for institutions of sustainability to evolve.