The objective of this study is to describe the peasant economy and its relation to rural development. This dissertation reviews a basic literature on rural development, identifies and discusses the socio-economic characteristics of peasants, quantifies peasants' production-consumption, analyzes the technologies used in farming by peasants, discusses peasant differentiation, and identifies the problems that are most pressing to peasants;This study is based on a pilot sample survey of 263 families in 20 peasant communities around the Lake Titicaca in the Puno, Peru area. This survey was done during the summer and fall quarters of 1978;Multivariate analysis of variance, analysis of variance and cluster analysis confirm that peasants are not homogeneous. Peasant differentiation exists between and within communities. Peasant communities differ according to economic variables, but not to social variables. A cluster analysis determined that two subgroups of peasant communities exist: (a) peasants around the lake and (b) peasants far away from the lake. Peasants farm small plots of land that are dispersed in different places. They own few livestock and farming tools. An average peasant household owns only 2.2 hectares of land that is farmed by "traditional" means;The peasant populations are growing but resources are limited (particularly arable land.) Their main problems are poverty, poor health, low income, lack of education and malnutrition. To solve these problems an integrated rural development approach is suggested. Appropriate economic policies and technologies are needed (particularly land reform.) True rural development will start only with the organization and political participation of the rural poor to control their lives.