The objective of this report is to evaluate the targeting method used by PROGRESA in identifying beneficiary households. PROGRESA’s methodology consists of three stages: (1) the selection of localities; (2) the selection of beneficiary households within selected localities, and (3) finalizing the list of beneficiaries after feedback from the community assemblies about families excluded or included incorrectly. We evaluate in detail the first two stages of the selection process. We do not provide an evaluation of the third stage of selection as the number of households whose selection into PROGRESA was disputed at this stage of the selection process was minute (0.1% of the total number of selected households). Our evaluation is based on a framework consisting of three key elements: (i) a social objective, (ii) a set of economic, political and social constraints under which policy has to operate, and (iii) a range of instruments available to attain these objectives. Although PROGRESA has a number of interlinked objectives with respect to health, education and nutrition, we will measure the benefits of PROGRESA’s targeting solely in terms of its potential impact on poverty alleviation.