This paper presents issues and challenges for farm and enterprise diversification and integration of small scale farmers into value chains in East Europe and Central Asia (EECA). First, it discusses context and approaches to agricultural and rural income diversification. Second, it assesses the extent of agricultural diversification in EECA. Third, it identifies issues, challenges and lessons learnt of the integration of small farmers into agricultural value chains in the region. Forth, it outlines options and areas of intervention to foster diversification and market inclusion of smallholders in EECA. Finally, it concludes with recommendations for improvement of public policies and international assistance.