The paper discusses the impact of industrialized countries' agricultural policy on the development of rural areas, with special reference to the CAP. Against the background of the principles of rural development policy it analyses effects on employment and environmental objectives in rural areas. The impact of agricultural market policies is highly problematic. Structural and agro-environmental policies are largely of a "second best" nature. Policies for less-favored areas are hardly suited to help in the development of structurally weak rural areas. The new reform of the CAP tends to reduce many of the drawbacks but does not contribute sufficiently to rural development. The paper draws some conclusions as to how agricultural policy can make a more fruitful contribution to rural development in the future with a view to shifting from a sectoral to a more territorial policy approach.