The Government of Tanzania is committed to poverty reduction and the attainment of social and economic development. To this end, in the context of the Highly Indebted Poor Countries initiative,formulated the National Poverty Eradication Strategy as a medium term strategy. Part of the strategy to refine policies for poverty reduction is an extensive monitoring programme undertaken by various working groups. This is the report of the Research and Analysis Working Group carried out in the second year of the poverty eradication strategy. It presents an overview of the status of the main poverty indicators; including trends, magnitudes, urban poverty and vulnerability, rural-urban disparity and macro-micro economic linkage. The findings show that levels of poverty are high and do not show significant signs of decline especially in the rural areas. The decline in infant mortality appears to be reversing, with the spread of HIV/AIDS as a major cause, but more positively school enrolment has improved, following the abolition of fees. The report further identifies that good macroeconomic performance in the 1990s has not resulted in a reduction of poverty, and highlights groups which are at high risk of sliding into poverty and extreme poverty such as the unemployed, orphaned youth, the elderly and those involved in precarious activities such as commercial sex or quarrying. Finally the report proposes any legal or institutional changes, and refinements to its own analysis tools and framework.