The emergence of Highly Pathogenic Avian Influenza (HPAI) of the subtype H5N1 and the potential threat of a global human pandemic have been issues of great concern to the international community since its regional and global spread since 2003. At the same time, there has been less emphasis placed on the assessment of the effects of implemented mitigation strategies on the livelihoods of smallholder farmers and their families in affected developing countries. While policymakers must take rapid and effective action to control the disease, some of their actions may lead to a number of direct and indirect effects that disproportionately negative impact the poor. The Department for International Development (DFID) of the United Kingdom has recently funded the Pro-Poor HPAI Risk Reduction Strategies Project that aims to help decision makers in developing countries generate evidence-based, pro-poor HPAI control measures at national and international levels. These control measures should not only be cost-effective and efficient in reducing disease risk, but also protect livelihoods, particularly of smallholder producers in developing countries. This project is being implemented in eight countries in Africa and Southeast Asia, including locations where HPAI has not yet been reported, where sporadic outbreaks have occurred, and where the disease is endemic. The International Food Policy Research Institute (IFPRI) and the International Livestock Research Institute (ILRI) are responsible for project activities in Africa and Indonesia. HPAI, of the subtype H5N1, first appeared in Java in August 2003 (and officially declared in January 2004) and spread rapidly to other parts of the country; since 2006, it has been considered to be endemic in many parts of Indonesia (MoA, 2007; OIE, 2006; Promed-mail, 2003; Sims et al., 2005). Its persistence represents a serious risk to animals and public health in the region. Frequent outbreaks are observed in rural areas where backyard poultry are kept. Humans are rarely but consistently infected. With 108 confirmed fatal human cases since 2005, Indonesia is the country with highest number of human deaths (WHO, 2008). A first step in initiating this project is to compile and assess, in the form of a background paper, the current state of knowledge of poultry systems and their place in the larger economy, the current HPAI situation and its evolution, and institutional experiences within its control. This information is of critical importance to underline existing information, identify research gaps, and better target further research activities in the project. This background paper was jointly developed by researchers from two different universities in Indonesia; an economic scientist from the University of Bogor and a veterinary epidemiologist from the Gadjah Mada University, Yogyakarta.