This paper argues that current agricultural policy in El Salvador is failing to further the goals of macroeconomic growth and stability, sustainable livelihood security, and environmental sustainability. Macroeconomic policy has turned relative prices sharply against agriculture. The plight of the rural poor has been exacerbated by continuing inequities in the agrarian structure. The breakdown in rural livelihoods and limited access to land and other assets is accelerating environmental degradation. Suggested alternative policies such as more favorable price policies, agrarian reform, and environmental restoration would promote sustainable development by capitalizing on the complementary among growth, poverty reduction and consolidation of peace.