This paper lays out a rationale for building local rural development policies that focus on potential strengths of school-community relationships, while empowering local citizens. Rural communities and their schools are caught up in trends that complicate policy at all levels. These trends include changes related to national and global economic restructuring, devolution of government, and systemic education reform based on higher standards and accountability. The rural school-community relationship is crucial to community sustainability. In rural communities buffeted by changes that have depleted capital, tax bases, institutional resources, and population, schools may be one of the few remaining vital institutional forces. Despite the perils and problems, the confluence of economic restructuring, government devolution, and systemic school reform offers schools and communities an opportunity to form new relationships based on their mutual dependency, the promise of improved quality of life, democratic ideals and practices, and the urgency of community survival. Rural school officials and community leaders must cooperate in formulating holistic community-development policies that address local needs, include diverse citizen participation, and build community capacity to enhance democratic processes. School governance is already changing, as efforts to increase accountability demand meaningful community engagement. In their role as a local institution, schools must also become community centers that engage the whole community in their operating decisions, services, and programs. Conversely, rural communities must use schools as democratizing institutions that train adaptable citizens and workers to sustain community life in an uncertain future. (Contains 41 references.) (SV)