Rural economic diversification, both within agriculture and into non-agricultural activities, has significant potential to reduce poverty, increase coping mechanisms in face of crop failure or price volatility, and improve food and livelihood security of rural households. While approximately 20 to 50 per cent of the rural population in Africa, Asia and Latin America is employed in non-farm work, a large share of the population continues to depend on agriculture for their livelihoods. A dynamic agricultural sector should therefore be at the centre of rural development strategies, creating better jobs in the sector and, at the same time, enabling the growth of non-farm activities in the rural economy. To secure the potential of economic diversification for poverty reduction and decent work, three main policy priorities are suggested: strengthening family farms; developing the food product markets, breaking down the barrier of risk for the producer; and implementing this in the framework of territorial policies that strengthen rural-urban linkages through the promotion and development of the service functions of small cities and country towns. The International Labour Organization (ILO) has relevant technical expertise in sectoral policies, training, local economic development, value-chain analysis, small enterprise development, policy-making and social dialogue, thus it can contribute to this agenda for economic diversification in rural areas.