Hungary has made steady progress in closing the income gap vis-à-vis high-income OECD economies. The level of innovation activity and performance, however, has remained comparatively low by most available indicators. As the income gap narrows, Hungary will have to raise its innovation performance in order to sustain the convergence process. Creating framework conditions conducive to innovative entrepreneurship and building efficient institutions of science, technology and innovation policy are key in boosting innovation. While many elements of a modern innovation system have been put in place since 1990, a more stable governance structure and medium- to long-term perspective in the realm of public research and development (R&D) policy would be helpful, not least to make efficient use of increased public funding for R&D and innovation co-financed by the European Union. More systematic monitoring and evaluation of public support programmes for innovation would provide the basis for a more evidence-based policy. In addition, there is a need to adopt more specific measures addressing major challenges facing Hungary’s innovation system: enhancing human resources for science and technology; fostering innovation in the business sector as well as excellence and relevance of public research; and developing international linkages in science, technology and innovation. These issues will be addressed in this chapter, and – in more detail – in OECD Reviews of Innovation Policy: Hungary (OECD, 2008a forthcoming).