Small and medium enterprises are a key factor in the economies of the Central and East European transition states, where successful small businesses have been expected to grow larger, create jobs and increase prosperity. This article examines the emergence of small and medium enterprises (SMEs) in Poland. In the first part we will focus on the institutional framework and reforms in Poland during the system transformation. Subsequently we will describe the actual development of SMEs growth and present the role of SMEs in the sustained economic development. In part three we will describe the main policy approaches followed by the Polish government and finally, we will identify future opportunities and threats for SME and touch upon how government intervention will be necessary to insure further SMEs growth.