In the Amazon, 1,354 rural settlements had been created up to 2002, occupying more than 231 thousand square kilometers. Those settlements are vital for land distribution and have already benefited some 231,815 families. However, activities developed by the families, such as agriculture and logging, have great potential for generating deforestation and forest degradation in the region. In this State of the Amazon , we assess the situation of deforestation in the Land Reform Settlements in the Legal Amazon. To do this, we combined deforestation data with the map of settlements created from 1970 to 2002 by the Brazilian Colonization and Land Reform Agency ( Instituto Nacional de Colonização e Reforma Agrária – Incra). Around 106 thousand square kilometers (49% of the area of settlements mapped) were deforested up to 2004, representing 15% of Amazon deforestation. Additionally, from 1997 to 2004, the rate of deforestation in the settlements was 1.8% per year. Three measures may be able to harmonize the social demand for land reform with the urgent need to reduce deforestation and recover environmental losses in the settlements. First, create settlements in deforested/ degraded areas. Second, recuperate deforested areas in the settlements, especially those situated in the Legal Reserve areas (RL) and Areas for Permanent Preservation (APPs). Finally, include the settlements in the government program for monitoring deforestation in the Amazon.