This paper aims to describe and explain the changes which have taken place in the rural areas of Israel by focusing on a particular type of community--the "moshav," which is a planned smallholders' settlement, based on family farms and legally organized as a cooperative society. An analysis of the changes that have taken place in the "moshav" in the past few decades reveals a process of rural restructuring, similar to that which is occurring in many developed countries. New economic activities have replaced farming as sources of income, and newcomers, mostly of urban origin, have invaded rural communities in search of a better quality of life. These changes derive from a combination of structural changes in agriculture, changing government policies and cumulative decisions of rural households. The result is a more heterogeneous "moshav"--physically, economically and socially, and growing regional, inter-village and intra-village disparities. These developments have a direct impact on the organizational structure of the "moshav," its environmental qualities and its exchange relations with the urban sector. As part of the ongoing process of change the "moshav" is gradually losing some of its unique features, which formed the basis for its identity as a special type of rural community. This leads to the question of whether the "moshav" will be able to develop a new identity as a distinct type of rural community, or turn into a suburban or urban community. The answer will depend largely on the direction taken by government policy.