This publication reports on a further investigation of hill country development undertaken by the Agricultural Economics Research Unit. Molesworth Station is a large property in the tussock grassland area of the South Island which reverted to the Crown in the 1930's. At that time, the leaseholder faced ruin from poor wool prices and the ever-mounting expense of controlling rabbits. The property then passed to the Lands and Survey Department, who initiated a long-term development programme based on strict rabbit control and the grazing of cattle instead of sheep. The rehabilitation of Molesworth had to be planned in 1940, however, and at that time the crucial decision was made to replace the basic grazing animal as well as eliminate its competitors. Thus a complete cattle grazing policy was initiated. This study documents the economic progress of the chosen policy.