This work reflects the results of a student survey and focus-group discussions and in-depth interviews with educators and policy practitioners to examine the connections between the higher education system and labour market demands in Azerbaijan. A notion of an Index of Students' Optimism regarding employment prospects has been introduced in this study. It is found that private university students are much more optimistic about employment opportunities as compared with their public university fellows. Available options are considered for the Azerbaijan state policy modernization in the higher education area that would promote students' capacity to cope with competitive challenges in the job market. (Contains 8 footnotes and 7 figures.)