This paper compares rural and urban poverty dynamics in transitional Russia using micro data of the RLMS and discusses their differences. The analysis focuses on relationships between poverty dynamics and labor force status. Rural poverty results from the working poor, hidden unemployment out of the labor force status, unskilled jobs, and lack of the jobs out of the agricultural sector. It concludes that alleviation of poverty is still a challenge in the rural areas, although current economic growth is helpful for reducing poverty. Active policies for the reduction of rural poverty such as promotion of regional economies, job creation in the nonagricultural sector, move of the labor force to an industry with higher productivity would help to alleviate rural poverty.