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From 2006-2010 deforestation in the Amazon frontier state of Mato Grosso decreased to 30% of its historical average (1996-2005) while agricultural production reached an all time high, achieving the oft-cited objective of increasing production while maintaining forest cover. This study combines satellite data with government deforestation and production statistics to assess land-use transitions and potential market and policy drivers associated with these trends. In the forested region of the state, increased soy production from 2001-2005 was entirely due to cropland expansion into previously cleared areas (74%) or forests (26%). From 2006-2010, 78% of production increases were due to expansion (22% to yield increases), with 91% on previously cleared land. Cropland expansion fell from 10% to 2% of deforestation between the two periods, with pasture expansion accounting for most remaining deforestation. Declining deforestation coincided with a collapse of commodity markets and implementation of policy measures to reduce deforestation. Soybean profitability has since increased to pre-2006 levels while deforestation continued to decline, suggesting that anti-deforestation measures may have influenced the agricultural sector. We found little evidence of leakage of soy expansion into cerrado in Mato Grosso or forests in neighboring Amazon states during the late 2000s, although leakage to more distant regions is possible. This study provides empirical evidence that reduced deforestation and increased agricultural production can occur simultaneously in tropical forest frontiers through productive use of already cleared lands. It remains uncertain whether government and industry-led policies can contain deforestation when market conditions again favor a boom in agricultural expansion.