The article presents the origin and essence of the co-operative economy and the most characteristic features that differentiate it from other forms of economic activity. The article includes also an outline of the birth and development of co-operatives on Polish land at the time of partition, later during the Second Republic and at the times of communist state run economy. The main part of the text characterises changes of the transition period that resulted in the reduced role of the co-operative activities in economy. The share of co-operatives in the important economic categories of national economy has fallen and especially the importance of co-operatives among all the enterprises forming private sector has collapsed. The presented calculations based on the statistic data show that Polish co-operatives are not fully capable of coping in the market economy environment.