Uganda over the last twenty years has maintained high economic growth rates, increasing urbanization and shifting patterns in sectoral contribution to overall development. An increasing proportion of the wealth generated by Uganda’s economy is shifting from being a product of agricultural activities to coming out of the service sector of the economy, in particular. However, this shift in the sources of wealth in the economy is not being accompanied by a shift in employment out of agriculture to the other sectors. Rather, what we find is that employment is actually increasing in agriculture, even as its contribution to Uganda’s economy is declining. The increasing number of Ugandans engaged in agriculture is more a reflection of the inability of the more modern sectors of the economy to provide adequate employment for the many Ugandans entering the workforce every year. Given the widely established importance that the concomitant processes of structural transformation of the economy and urbanization play in economic development, this paper on Uganda has two objectives. The first is to systematically document these transformations by looking at both demographic change (urbanization, agglomeration patterns, and migration) and welfare change (rural-urban welfare differences). The second goal is to explain these patterns of transformation, particularly in terms of macroeconomic and sectoral change in the economy. In our concluding section we reflect on recent development strategies of the government of Uganda with regard to how they address, or fail to address, issues of ruralurban transformation.