The economy of the Ukraine is in transition from a communist command-and-control to a capitalist system. In this paper, we describe the current state of its forest resources, the structure of its forestry and wood processing sectors, and the problems facing policy makers. While the forest sector should be, and still has the potential to become, an engine for economic growth, the combination of past exploitation and the slow pace of economic reform are major obstacles to implementing rational forest policies. Given the right economic incentives and appropriate forest policies, it may still be possible for the Ukraine to improve its future timber supply while enjoying environmental benefits from its forests. However, this requires economic and institutional reforms beyond the forest sector.