This chapter discusses: (i) the strategic interactions between natural resource management options; (ii) farm-household livelihood strategies for welfare and risk; and (iii) the surrounding market and institutional conditions for simultaneously enabling poverty reduction and sustainable land use. The chapter starts with a definition of the main characteristics of less-favoured areas (LFAs), followed by an analysis of the interactions between poverty and resource degradation in LFAs. Hereafter, the biophysical, micro- and macroeconomic dimensions of LFA development are discussed in order to provide insight in the complex interfaces between agroecological options, household drivers for change and effective incentives for resource use adjustment. The chapter concludes with some major implications for policy and research concerning strategies for sustainable poverty reduction in less-favoured areas.