This study examined the role of literacy in enhancing rural people's capabilities for participation in Uganda's Plan for Modernisation of Agriculture (PMA), an intervention aimed at improving rural livelihoods through commercialising subsistence agriculture. Using Amartya Sen's capability approach, in which poverty is conceptualised to be a capability deprivation as the conceptual frame of reference, the study aimed at exploring how literacy facilitates or inhibits rural subsistence farmers' participation levels in PMA activities in Manibe Sub-County, Arua District. Using data collected from 54 research participants analysed interpretively, the study revealed that the majority of PMA activities demand a high degree of interaction with written materials, mostly in English, which created an unconducive atmosphere for the unschooled in the target group, thereby forcing them to depend on literacy mediators. It further revealed that there were more women than men participating in parish level activities which greatly decreased in favour of men at sub-county levels and above. It also found that farmers' groups were treated uniformly which negatively affects some of them in terms of access to resources and options. It further revealed that lack of supporting resources, stringent conditions for accessing Enterprise Development Funds, and difficulties in meeting farmers' co-funding requirements, were creating serious obstacles in undertaking group activities, hence making many potential participants avoid PMA activities. The main thesis in the study is that transforming rural subsistence producers into small-scale commercial farmers as a rural poverty reduction strategy, without providing them with the means to expand their basic capabilities so as to move out of capability deprivation, will not by itself increase rural incomes and reduce poverty. It is argued further that engaging the rural subsistence farmers in commercial agriculture will tend to enrich the educated few who are already better resourced. Since capability deprivation, amongst others, manifests itself through widespread illiteracy, the study recommends that efforts to eradicate rural poverty should focus on expanding the capabilities of the target group through building their literacy skills and improving their access to basic resources. / Thesis (Ph.D.)-University of KwaZulu-Natal, Durban, 2009.