This paper focuses on three decades of agrarian reform policies and the resulting peculiarity of the development trajectory in Bangladesh. I interrogate the ways in which the reforms have led to a paradoxical situation consisting of partial protelarianization in attempting to promote a market‐based economy. I contend that the particular positioning of the state is central to understanding this dialectic between proletarianization and the persistence of small peasants amid a huge rush towards the formation of a capitalist market economy. I conclude that the partial nature of agrarian transformation that we now experience in Bangladesh may not be resolved in favour of a complete proletarianization of small peasants in the foreseeable future.