This paper studies the role of market driven structural changes, and changes in agricultural policy in reconversion of permanent grassland to cropland in Estonia. Data on parcels of agricultural land and beneficiaries of direct payments in Estonia, from 2013 to 2016, and logistic regression is used in the analysis. It is argued that as a result of crisis in milk market in 2015 and 2016 some of the dairy farms changed their specialisation to cereals, oilseeds and protein crops and reconverted some of their permanent grasslands to cropland. At the same time, dairy farms who quit milk production and became specialised in cattle, sheep and goats preserved their permanent grasslands. In 2015 and 2016 the cheapest maintenance practice of permanent grassland, grass chopping, was restricted on a beneficiary’s permanent grasslands that exceeded 10 ha. This stimulated changes in land market. Some of the permanent grasslands that were preserved by passive land owners were transferred to cereals, oilseeds and protein crops farms, and cattle farms. As an adverse effect, this increased likelihood that permanent grasslands were reconverted to cropland. It is concluded that since passive land owners and cereal, oilseeds and protein crops farmers also contribute to maintenance of permanent grasslands, the cheapest maintenance practices should not be restricted. At the same time, it is crucial to improve resilience of grassland farms that contribute the most to permanent grasslands preservation.