Land degradation is a critical challenge to sustainable development in Central Asia. The study found that land degradation over the previous three decades may have been responsible for about 27% losses in agricultural profits in the region during the 2009-2010 cropping season compared with the case without land degradation. Middle- and richer tercile of agricultural households lost a higher share of their farm profits due to land degradation, 30% and 34%, respectively. There was not a significant impact of land degradation on the farm profits of the poorest tercile. The poor agricultural households have a stronger dependence on land for their livelihoods, hence; have a stronger incentive to take a better care of land. The results corroborated this: the poor households applied, on average, 25% more sustainable land management practices than the richest group, and almost twice more than the middle group. The poor have higher incentives to manage their land sustainably if institutional and economic settings allow them to do so. Among such institutional factors, the study found that increasing crop diversification, securing land tenure and providing a better access to markets significantly contributed to higher farm profits among poor agricultural households in Central Asia. Acknowledgement : We thank the German Federal Ministry for Economic Cooperation and Development, and Center for Development Research (ZEF), University of Bonn, for the support in the development of the methodological framework in this paper. The analysis and literature review in the paper were supported by Russian Science Foundation, project ? 14-38-00023. We are highly grateful to the International Center for Agricultural Research in the Dry Areas (ICARDA) for the survey data and the Asian Development Bank (ADB) for funding the survey.