The present thesis is an investigation of sustainable rural community development in the face of the global economy. It aims to develop a framework for capacity building, leading to the empowerment of rural communities in developing countries in response to restructuring and adjustment policies as the key elements of globalization.The thesis begins with an explanation of the process of globalization and its core element, restructuring and adjustment policies It demonstrates that remedies to the impacts of these policies, in particular on the rural life, is not sufficiently addressed in the literature. Then it outlines the impacts of these policies on rural communities in developing countries. It then builds a theoretical framework for capacity building. It is argued that developing the institutional, intellectual, physical and environmental capacities in rural communities can be actualized only through a participatory rural organization, as the most important element in a capacity building model.Using this framework, the capability of the Farmers Agricultural Producer Co-operatives is investigated as a foundation for capacity building and peoples empowerment, using the case of rural Iran. It argues that these organizations have the potential to become an appropriate participatory institution for peoples empowerment. The empirical findings from the field research, mainly focusing on a number of FAPCs in Hamedan Province of Iran, suggested successful performance of these organizations in some economic, social, technology, educational and training areas. It was demonstrated, however, that these organizations should undergo a range of reforms and improvements to be adapted to the requirements of a genuine capacity building model.The most essential improvement should be made in the government approach to these organizations. The government approach should evolve and shift from managing and controlling these organizations to being merely supportive. In other words, it should shift from government to governance by the rural people. This should be accompanied by adopting new legislation on the operation of these organizations, so as to accommodate for the changing situation in the era of restructuring. Another important proposed reform is one of promoting and training of the co-operative members to participate in the cooperative related decision-making process. At the same time, these organizations are a means toward peoples empowerment to confront the negative impacts, and using the opportunities, of restructuring policies. As a result, there should be more emphasis on education and training about the impacts and mechanisms of these policies. Finally, the economic objectives should not compromise the social and environmental considerations. As the impacts of restructuring policies are multidimensional, the responses should also be multidimensional.