This paper examines the possibilities of developing agri-environmental policy measures in Israel, focusing on market-oriented instruments. A conceptual framework for developing agri-environmental policy measures is presented, first in very broad lines (mandatory regulations, economic instruments and advisory measures) and subsequently focusing on economic instruments, and specifically, on market-oriented ones. Two criteria of choice between the measures are suggested: their contribution to improving the effectiveness of the policy; and the feasibility of their implementation. This is the framework used for analyzing agri-environmental measures in Israel. Israel currently implements a mix of mandatory regulations, economic instruments and advisory measures to promote the agri-environment. The use of additional economic instruments may improve the effectiveness of the policy. When comparing the effectiveness of various economic measures, we found that the feasibility of implementation of market-oriented instruments is greater, due to the Israeli public's preference for strengthening market orientation in the agricultural sector. Four market-oriented instruments were practiced in a pilot project conducted in an Israeli rural area. We found that in this case study, the institutional feasibility and acceptance by stakeholders were the major parameters influencing the implementation of the market-oriented instruments, whereas the instruments' contribution to enhancing the ecological or economic effectiveness were hardly considered by the stakeholders as arguments in favor of their use.