The objective of this paper is to examine the divergence of actual prices from clearing demand-supply prices. The results indicate a shift of the operation of the agricultural price system towards a market determination of prices. The econometric estimation results for Bulgaria show that for many products the impact of total cost (cost-plus pricing) on price formation is declining during the transition period; on the other hand the impact of excess demand (market pricing) is increasing for all the products that were considered in the study. The results of the model indicate the existence of an important structural break at the beginning of the transition in the determination of agricultural prices in Bulgaria. This structural break, which is observed in the early years of transition, confirms that a transformation of the price mechanism is actually taking place in Bulgaria, leading the agricultural sector towards a liberalised mechanism of price determination.