Small-scale agricultural producers in Central America tend to belong to the poorer sections of society. Livelihood needs may force them to overexploit the few natural resources to which they have access. On the other hand, growing markets for environmentally friendly and socially responsible agricultural products provide increasing opportunities for reconciling conservation and socio-economic development. This study aims at determining the extent to which economic incentives - including improved market access, price premia, and environmental service payments - can promote environmentally and economically sustainable coffee production on farms in the Volcanic Central-Talamanca Biological Corridor in Costa Rica. This study is based on a purposive random sample of 88 coffee farms selected according to three distinguishing criteria: organic vs. conventional production; complex vs. simple shade; higher vs. lower altitude. Household heads and their spouses were interviewed to inquire about technical, biophysical and socio-economic characteristics. Households were grouped according to their actual and potential response to economic incentives for environmentally friendly coffee production. The first group comprises households already producing in an environmentally friendly fashion and willing to continue to do so largely independent of economic incentives. The second group is currently less committed to environmentally friendly production modes but considers converting to them should economic incentives be more readily available. The last group includes households that irrespective of economic incentives would not adopt environmentally friendly production modes. For each of these groups, we analyze household livelihood strategies and their related vulnerability context, as well as the financial performance of their coffee production systems. We develop indicators that define the nature and magnitude of economic incentives that most effectively promote environmentally frie