Immediately after the Sandinista victory of July 1979, the Nicaraguan agrarian reform began with the expropriation of Somoza's agricultural estates and their conversion into state farms. Four years later, the land expropriated under the 1981 Agrarian Reform Law was being distributed to peasant production cooperatives and increasingly to individual peasant farmers. This article will analyze this shift in Sandinista agrarian policy and attempt to explain the factors shaping the course of the Nicaraguan agrarian reform. The focus is on the central policy debate of the first four years: the extent to which the agrarian reform should favor state farms, production cooperatives, or individual holdings. That debate encompassed a series of related issues that will be examined here, including the rhythm of technological modernization, capital-intensive versus labor-intensive investment schemes, the pace and depth of socialist transformation, and the entire question of tactical and strategic alliances within the revolution.