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After remodeling the economies of the Western world all along the 1980s, deindustrialization abruptly hit the former socialist countries in the early 1990s. Deindustrialization with destructuring meant the disintegration of the economic structure and industrial cities, and regions entered a downsizing spiral of population loss after the breakdown of traditional industries, outmigration and suburbanization. Post-socialist Europe forms a new 'pole of shrinkage'. Set within the regional context, deindustrialization and urban shrinkage show a solid cause-effect relationship in the Romanian case. The industrial change of cities creates a pattern of uneven growth which stays at the core of understanding the emerging urban shrinkage. The paper finds out that 122 out of 260 towns had an above average Location Quotient (LQ) of industrial employment in 1992 and about 5 million urban dwellers were under the threat of forthcoming deindustrialization. Towns of all demographic sizes were above average industrialized but mostly were medium-small and medium-big towns. They lost more than one quarter of the 1992 population number, significantly higher than in towns with below average LQ of industrial employment. At a large extent, the mix of urban, regional and industrial policies failed to reduce the social costs of deindustrialization. The policy response of spatial strategies, while avoiding the 'one size fits all' perspective, should be focused on place-based approach and should be built on economic diversification, complementarity and cooperation within the specific territorial context of small and medium-sized towns. [ABSTRACT FROM AUTHOR]