The transition from plan to market has fundamentally transformed the social structure in Central and Eastern Europe and the Former Soviet Union. The small Central Asian Republic of Kyrgyzstan exemplifies these changes.Using data from nationally representative living standards measurement surveys in 1993 and 1997, changes in welfare and the social structure are analyzed. The results suggest that poverty and inequality fell between 1993 and 1997. Real welfare improvements were recorded for the poorest households and for the richest five per cent. Despite these successes, massive inequalities persist.Region and the presence of dependant household members are important correlates of welfare and social class formation. High levels of welfare in 1997 are related to entrepreneurial and capital rental activities. There is tentative evidence to support the hypothesis that the factor markets increasingly determine social structure.