Poverty is deep and widespread in Honduras. This is especially the case in the hillside areas-home to one-third of the country's population, the majority of whom earn their living through agriculture. While both policymakers and donors are under strong pressure to provide adequate interventions, they require guidance on what drives sustainable rural productivity growth, how to prioritize expenditures, and how to formulate effective development strategies. In this report, the authors develop an integrated econometric framework, based on the livelihoods concept, and demonstrate how it can be used as a policy targeting tool. Using this framework, the authors provide policymakers and stakeholders with empirical information on the livelihood strategies currently employed in the hillside areas of Honduras, existing opportunities for alleviating poverty, and potential priorities for policy and investments.