Despite progress in poverty reduction during the last four decades, Indonesia is still plagued by high rate of multidimensional poverty and deprivation. The 2009 monetary poverty rate of 14.15% is 5.95 percentage points higher than the government’s initial target, while in other dimensions of poverty Indonesia lags behind its neighbours. There are opportunities for accelerating poverty reduction in the future by the virtue of globalisation, demographic dividend, adoption of participatory development approach, and support from international commitment on millennium development goals (MDGs). On the other hand, there are critical constraints to reducing poverty and vulnerability in the forms of insufficient productive opportunities, weak human capabilities, and inadequate social protection. The strategy for accelerating poverty and vulnerability reduction is to capitalize on the opportunities and at the same time effectively address the critical constraints. The policy objective is to enhance human and non-human capital accumulation of the poor to empower them to move out of poverty, while at the same time strengthen the capacity of the near poor to avoid falling into poverty.