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Developed countries reaffrm the role of agriculture in the functioning of the entire economy, emphasizing the importance of agricultural production. Faced with the need for greater investment in agriculture while directing new investments into underdeveloped rural areas, transitional countries must realistically assess their potentials and limitations in this area. The aim of the study is to defne the characteristics of the SME sector during structural changes in agriculture, which is one of the drivers of economic development of Serbia. This study analyzes the current state of the sector of small and medium enterprises and entrepreneurs in agriculture and examines indicators that point to their development. How to encourage the development of agricultural production in a country that has experienced a complete economic collapse? Why do incentives to entrepreneurship and agricultural production in the Republic of Serbia have no expected effects? Institutions of the Government of the Republic of Serbia have created a whole spectrum of economic and fscal incentives after the 5th October changes, but the effects of such programs are limited. Political managing of funds, institutions and ministries reduces the effciency and transparency of the program, which greatly reduces the scope and importance of these programs in a healthier business environment. Serbias determination to continue European integration obliges economic policy makers to comply with the most important economic development documents and strategies accepted by EU countries. General economic development must provide the conditions for further successive expansion of agricultural production in Serbia, while at the same time undertaking measures for the modernization of agricultural holdings as part of integral development.