This report discusses trends affecting the future of rural development in Kentucky and describes strategies for leveraging more positive outcomes for rural communities. In addition to the enduring legacies of rural poverty, inadequate infrastructure, low educational attainment, and joblessness, contemporary rural Kentucky is also characterized by demographic flux, economic realignment, and persistent disparities that complicate and frustrate the pursuit of prosperity. Coal and farming industries, once the mainstays of Kentucky's rural economy, are being replaced by low-skill, low-wage manufacturing and service jobs. These industries are ill-prepared for competing in a global economy and for providing training for the high skills demanded by globalization, technological advancement, and organizational change. The impact of a global economy, as well as the rising expectation that government must do more with less, has led to the increasing importance of civic engagement and the ability of local communities to build from within. Community capacity-building initiatives include promoting a long-term perspective on development; initiating regional and multicommunity approaches; cultivating a broad base of community leadership through formal project-specific training and process training aimed at sustaining engagement and participation; and developing a database indicative of community strengths, weaknesses, and relative position in the larger economic context. Recommendations include reinforcing the themes of thinking and planning for engagement with the world, focusing resources and efforts at the community level, and developing high-performance government that implements new approaches to formulating and implementing policy. A case study of rural development success in Tupelo, Mississippi, is included, as well as 86 resources and a rural development questionnaire. (LP)