Kyrgyzstan is one of the poorer countries undergoing transition from a centrally planned to a market economy. Unlike its neighbour Uzbekistan, Kyrgyzstan followed a rather radical reform strategy, introduced liberal macroeconomic reforms and large scale privatization. Having laid major foundations for a market economy these reforms have entailed high social costs and profound changes from largely egalitarian social structures to greater inequality and social stratification. Major social consequences of the transition include a decline in living standards for the majority, the appearance of unemployment, radical shifts in distribution of assets, increases in earnings inequality, changes in the welfare system associated with decline in major social benefits. These factors lead to re ranking of relative income positions and social status of many social and professional groups. One of the most important outcomes has been increasing social distance between the ?winners? and ?losers? of the reforms. This paper analyses the process of social stratification and the social structure emerging in Kyrgyzstan in the course of transition.\nMacroeconomic policies, privatization, agrarian reforms and changes in social security regime are considered as determinants of social stratification together with other factors, such as social networks (the role of community and clan relationship), ethnicity, the strength and role of institutions. This paper further focuses on income inequality and examines transformation of the old and characteristics of the new social classes and groups: the new elite, the middle class and the poor. This analysis is based on original 1993 KPMS and 1997 LSMS data. One of the major conclusions of the study is that the country needs a strong income redistribution policies addressing the very high level of inequality and massive poverty which present a major challenge to successful transition and sustainable development\n