This paper summarizes the potential contributions of the new institutional economics to agricultural policy research, with particular emphasis to developing countries. The paper starts by providing an overview of the new institutional economics and its several branches of thought. It then describes the future challenges facing world agriculture and shows the potential applications of new institutional and transaction costs economics to agricultural policy analysis in this new world environment. The paper concludes by providing specific agricultural market research issues that can be analysed using the new institutional economics. As a dynamic school of thought, the new institutional economics offers exciting opportunities to answer some of the economic problems that neo-classical economics has found difficult to address.