This publication analyzes the opportunities and constraints of the medicinal plants sector in Uttaranchal, India. It puts the analysis in the perspective of the current debate in India on agricultural policy reforms and measures to promote agricultural diversification. The report provides some practical ideas for capturing the potential benefits of the medicinal plants sector through developing market linkages between farmers and private industry, improved communication and coordinated action among the sectors’ relevant stakeholders, and solving the legal constraints related to cultivation and collection.