Transformation of the economy in Ukraine since its independence took place fast enough. However, the former communist system had a powerful influence on market mechanisms. As a result, the effectiveness of their actions did not justify expectations, because the market mechanisms could not provide equal opportunities for the development of different economic units, especially for agricultural producers. As a consequence, nowadays Ukrainian agriculture has a dual structure with the high developed corporate and the low commercial individual sectors. The present paper is based on the rural development concept which explores agriculture and rural area regarding the requirement of economic, ecological and social balance. The paper investigates the development of agriculture and institutional environment in Ukraine. It has been established that Ukrainian agrarian policy contributed to the development of corporate agrarian holdings, which don’t satisfy the social and the ecological purposes of agrarian and rural development while individual agricultural producers, which are provided the national food security, survive in unfavorable institutional environment and conditions of large capital market power. The main conclusion of this study is that the rural development policy requires not only to create effective institutions but also to change Ukrainian society understanding of their nature.