The objective of this paper is to measure income inequality and poverty in Slovenia before and after the beginning of transition. The paper uses the household level data of Household Budget Surveys of 1988 and 1993 and attempts an assessment of poverty and inequality. The results show that income inequality and poverty have increased slightly between 1988 and 1993, regardless of which measure of poverty is used. The Gini coefficient increased slightly from 0.28 in 1988 to 0.30 in 1993. Rural poverty is found to be much higher than urban poverty. About 56 per-cent of the agricultural households belong to the lowest two income groups (out of eight) compared to only 35 per-cent for the non-agricultural households. A similar situation is observed for both years.