Rural poverty continues to be one of the most trenchant development problems in Tanzania, and yet no comprehensive solution has been found. In this paper it is argued that without a fundamental understanding of the agrarian question, any attempt to derive meaningful conclusions on rural development is doomed to be incomprehensive and incomplete. The paper traces back the roots of this important scholarly exchange of the late nineteenth and early twentieth century, as well as summarising the resulting debate mainly between the neo-populist school and Marxian political economy. It then goes on to outline how this original understanding of the agrarian question extended to and influenced the contemporary rural development discourse, which however widely misrepresented the original contributions and created an illustrious array of antagonistic and inconclusive approaches that culminated in the recent World Development Report 2008: Agriculture for development. This theoretical discussion is framed and exemplified by the case of rural development, labour market participation and poverty in the West Usambara Mountains, Tanzania. Primary survey data collected by the author in 2008 is employed to analyse the current state of the farmers, their engagement in labour markets as well as ongoing processes of class differentiation. Returning to the initial debate, an attempt to link these current realities with the overall outlook for Tanzanian development is provided.