Abstract This paper examines the impact of a decade of transition on living standards and welfare in Central Asia and the Caucasus. Following independence in 1991 all countries suffered a sharp decline in GDP per capita, with levels in some countries falling to below a quarter of the pre-transition level. Since then, all countries have experienced positive economic growth. The key questions are whether this growth has been accompanied by declines in inequality and poverty and, if so, how sustainable are these improvements. There is some evidence that recent growth has benefited the poor. However, at the start of the new century, an estimated 39 million people in Central Asia and the Caucasus were living in poverty, of whom over 14 million were living in extreme poverty. Moreover, there is evidence of growing inequalities in terms of access to health and education services, with implications for future human development. Continuing poor governance within the region represents a major barrier to future poverty reduction.