This paper challenges the conclusions of earlier writers regarding the roles of smallholder agriculture, commercial agriculture and wage labour in rural poverty alleviation in Mozambique. We review literature from across Sub-Saharan Africa and use recently collected household level data sets to place Mozambique within this literature. Results show that, as in the rest of SSA, wage labour earnings are concentrated among the best-off rural smallholders; these earnings increase income inequality rather than reducing it. Results also suggest that the same set of households, who are substantially better-off than others, has tended to gain and maintain access to the ‘high-wage’ end of the labour market over time. Key determinants of access to ‘high-wage’ labour are levels of education and previously accumulated household wealth. Income from wage labour plays a key role in lifting out of relative poverty those ‘female-headed’ households that can obtain it, yet only about one in five such households earns wage income. We stress that the rural development question in Mozambique, and elsewhere in SSA, should not be framed as an artificial choice between promoting either wage labour opportunities or commercial agriculture or smallholder agriculture. The issue is what mix of approaches is needed to develop a diversified rural economy with growing total incomes, improving food security and rapid reductions in poverty. We suggest that commercial agriculture and increased rural wage labour are important components in any such strategy, but that this strategy will fail without substantial and sustained increases in the productivity and profitability of smallholder agriculture.