The Zambian cotton sector went through significant reforms during the 1990s. After a long period of parastatal control, a process of liberalization in cotton production and marketing began in 1994. These reforms were expected to benefit agricultural farmers. In Zambia, these are rural, often vulnerable, smallholders. This paper investigates the connection between the dynamics of the cotton sector and the dynamics of poverty and evaluates to what extent cotton can work as a vehicle for poverty alleviation. We find that cotton can indeed act as an effective mechanism for increased household welfare. We find income gains associated with cotton production as well as positive impacts on the long-run nutritional status of Zambian children. The impacts, however, are relatively small.