In northeast Thailand, 85% of the farmers are smallholders who are unable to meet their basic needs from agricultural production only. These tiny farms survive thanks to non-farm income, which faces increased difficulties as other economic sectors ran out of steam during the recent economic crisis of the late 1990s. In this context, farmers have to rely more on their agricultural production activity and income. But how can this be made possible in a region well-known for its very constraining soil and climatic conditions? To answer this question, and to examine the whole complexity of agricultural development issues, this article proposes an analysis of recent agrarian transformations and an understanding of farmers’ current practices and strategies. A diagnostic analysis of a village agrarian system located in Khon Kaen Province in upper northeast Thailand was carried out in 2002 by using a combination of field observations, interviews with key witnesses of the local history, and a farm survey of 26 diverse households. The recent history illustrates that farmers have shown a high adaptability to rapid changes in their economic environment, such as changing market demand for agricultural products and labour. The differentiation among farming households has led to different types of farmers with different resources, practices, and strategies. Families belonging to the most frequent type have a very tiny holding and their members are permanently or seasonally involved in unskilled off-farm activities. Their low and unstable total cash income is often insufficient to meet the family’s basic needs and they become deeply indebted. As efforts to improve water availability are being made, many Isarn families could improve their living conditions by diversifying their agricultural production systems with more small-scale fruit, vegetable, fish, or livestock production to improve household food security and cash income, eventually combined with non-agricultural activities. But currently, such a strategy is still out of reach for numerous very poor farmers facing elimination across the region, and government support to help them catch up is still needed.