Acquiring new knowledge and competences is crucial in the success of individuals, enterprises, regions and countries, since knowledge may become obsolete very quickly. Besides technological development, innovation can be characterised by well organised, risk reducing systems and networks. Innovation in Hungarian rural development with the establishment of a knowledge-based, competitive and successful rural economy is crucial. In Hungarian agriculture and rural development the market based innovation system building on endogenous resources is not operating. The innovation chain is narrow and underdeveloped, the majority of the innovations implemented in rural areas are small-scale and – without knowledge, equity and business relationships – are not viable. Agricultural innovation development is the primary area of intervention to boost the competitiveness and value added of farms and food processing enterprises, the utilisation of renewable resources and ICT development. At the same time in rural development the establishment of partnerships aiming at innovation dissemination can create the value added.