Biofuels have been criticized in academic and activist circles not only for their environmental consequences but also for their social impacts on food availability and on small-scale family farming. Meanwhile (global) initiatives and policies have been developed to stimulate "sustainable biofuels". Brazil a frontrunner in production and use of biofuels - aimed to combine biodiesel production with rural development. The biodiesel policy implemented in 2004 had two main objectives: to advance biodiesel as a transportation fuel and to foster the social inclusion of family farmers through participation in the biodiesel chain. Although participation of family farmers was low in the beginning, it increased substantially after a 2009 policy change that gave cooperatives a more prominent role. We analyze how, why and to what extent cooperatives are involved in integrating family farmers into the biodiesel chain and what this means for the social sustainability of biodiesel, taking the northeast state of Bahia as a case study area. The findings show that through the biodiesel policy, cooperatives until then a marginal phenomenon in northern Brazil increased their membership, were empowered and contributed to the economic development of a significant group of family farmers. However, these family farmers have not been substantially included in the biodiesel production chain itself. The biodiesel policy functions as a catalyst for rural (economic) development in which the cooperatives seem to achieve what governments were unable to achieve: the integration of specific categories of family farmers into agrarian development. Subsistence family farmers, in particular, have not been able to profit from this policy-driven, "market-oriented," rural development model. Hence, it can be questioned whether this policy has made biodiesel more socially sustainable. (C) 2014 Elsevier Ltd. All rights reserved.