Support for prime agricultural producers in Ukraine has been characterized by high volatility in the last decade, and some recent policy developments have contributed to the volatility and unpredictability. Until recently, the government support for agricultural holdings led to an increase in the export potential of the sector, but, on the other hand, it also brought a number of negative consequences. This study aims at reviewing of the present status of Ukraine's agricultural sector and rural areas and examines the role of the government intervention and support in the transformation of the agricultural sector and its effect on rural development to provide policy recommendations in this regard. Based on the analysis, the study provides policy recommendations suggesting that government need to promote cooperation of small farms and households (helping them to develop in organic agriculture direction) with agricultural holding companies and emphasizes that development of rural non-farm employment opportunities can be seen as a pillar of the rural development policy. In addition, it is necessary to foster organic agricultural development and provide local governments with greater authority in order to achieve sustainable agricultural sector and rural areas development.