Rural areas, due to their importance for the economy and society, have always been a subject of efforts to understand and model the growth drivers in these areas as well as to improve the standard of living (SoL) of rural populations. One of the most important factors shaping the functioning of rural areas is the presence of small towns and the number of functions they provide for surrounding areas. The significance of this factor is especially high in peripheral regions, such as the Warmińsko-Mazurskie Voivodship in Poland. Therefore, the aim of this paper was to analyze how the number and structure of functions performed by small towns in the Warmińsko-Mazurskie region affected the standard of living of rural residents in the years 2008–2020. The first part of the analysis was concerned with calculating the number and structure of functions performed by small towns in the region, using methods developed in the framework of urban economic base theory. The TOPSIS method was then used to quantify living standards in rural areas. Finally, the results of the two analyses were compared against each other. The results of the studies show that the standard of living in rural areas usually improved with an increase in the number of functions performed by the small towns. Additionally, the structure of these functions influenced the living conditions of the rural population. However, considering the relative rigidness of the urban network within the regional socio-economic system, it leads to the conclusion that existing disparities in the standard of living will be difficult to reduce in the near future.