An overwhelming majority of the population in Africa relies on subsistence agriculture for their livelihoods. Agriculture also contributes to a large percentage of the national income. Yet in Africa, agricultural productivity is extremely low, which is correlated with several intertwined factors, such as the low use of improved technologies, market failure, obsolete or lack of basic infrastructure and poor health during the beginning of the cropping season. Smallholder farmers are caught in poverty traps and are unable to participate either in the input market, partly because they cannot afford to purchase the inputs, or in the output market because they do not produce enough and/or market infrastructure is missing. Therefore, poverty reduction is the main goal of many African countries, and this study looks at the specific case of Mozambique. The poverty reduction literature can be roughly grouped into the following three lines of economic research: the role of economic growth, the role of nonfarm employment activities, and the role of agricultural productivity growth. These three strands of the literature will guide the analysis presented throughout this study. Thus, the first objective is to assess the trends in household incomes, poverty, and food security, in the midst of a neoliberal development model adopted by Mozambique, which focuses heavily on economic growth. The second objective is to assess the role of nonfarm activities in reducing household vulnerability to drought, while exploring the recent advances in econometric modeling of censored regressions. The third objective is to evaluate the economic impact of interventions that can enhance agricultural productivity, such as the use of improved technologies and the receipt of extension services, while exploring the recent advances in impact assessment analysis. The analysis is based on several nationally representative agricultural surveys in Mozambique, covering the period 1996 to 2008. The results suggest that in rural areas the number of poor households has increased in the last decade. This may be linked to a combination of the development policy adopted by the Government of Mozambique, and to recurrent droughts and floods. The receipt of extension services had a significantly positive impact on farm income, but they are unlikely to reduce poverty at present, due to their lower (and decreasing) coverage, and the inability of visited smallholder farmers to follow up with the technical recommendations. In general, the use of improved agricultural technologies did not have a significant impact on household incomes, which might be linked to the fact that market infrastructure development is not keeping pace with their promotion. Results also show that poorer households are more likely to engage in nonfarm activities. However, they also tend to earn the lowest incomes because they are unable to overcome the barriers to participation in nonfarm activities offering higher returns. These results indicate that a more proactive and interventionist role by the government could help in the fight against poverty. The policy options include increased investments in market infrastructure and agricultural services. This is particularly the case in central and northern Mozambique, where the agricultural potential is relatively higher and the average cropped area is larger. The southern provinces might benefit from a slightly different set of development policies, due to their lower potential for crop production and the smaller landholdings. There, the emphasis could be on promoting participation in nonfarm activities to compensate for poorer crop production, while ensuring that such access does not increase income inequality. Generally, households in all regions would benefit from better access to nonfarm activities, both as a means to cope with the vagaries of the weather, and as a more permanent strategy to reduce poverty