Since the 1970s, finding alternative permanent families for children in foster care who could not return to their birth parents has been a primary goal of the child welfare system. Since that time, significant gains have been made in helping such children find permanent homes through adoption and guardianship. This article analyzes these trends and finds: (1) A majority of states have doubled the number of adoptions from foster care over the 1995-97 baselines established by the federal government; (2) Legal guardianship initiatives at the state level have been instrumental in helping thousands of children achieve permanence; (3) Children who exit foster care to adoption tend to be younger than those who exit to guardianship; and (4) Postpermanency services and supports are important to the long-term success of these placements. Innovative efforts to find adoptive parents and legal guardians for children in foster care could transform the nature of foster care if the number of children permanently living with families who receive state subsidies begins to exceed the number of children living in foster care. Looking forward, these changes would require child welfare agencies to think creatively and thoughtfully about how best to serve families and the children in their care. (Adoption numbers by state 1995-2001 are appended. Contains 2 tables, 1 figure and 50 endnotes.)