Rural poverty and income distribution were critically analysed based on an intensive survey (1996-97) in eight villages representing all agro-ecological regions of Bihar. Results indicated that income distribution was less unequal in technologically 'developed villages' than in 'less developed villages'. Agriculture and/or rice income was more equally distributed than non-agriculture income. Thus, the diffusion of modern agricultural technology did not affect the distribution of agriculture income but rather reduced inequality of overall income distribution. Further, rural poverty was lower in technologically 'developed villages' than in 'less developed villages'.