The exclusion of ever larger pieces of arable land from production is a process characteristic for rural areas situated around large urban agglomerations. The conversion of arable land into plots serving non-agricultural purposes not only reduces the area of fields used in agricultural production but also exerts an influence on the supply of the so-called non-marketable goods such as the landscape or biological diversity. Such conversion may eventually lead to problems with preserving open space around large cities, which have already surfaced in many countries of Western Europe and the United States. At present, land management in Poland is in a large measure determined by the distribution of property rights. The latter can be largely attributed to the decentralisation process continuing since the early 1990s. On the other hand, the need for sustainable land management is surfacing, which calls for the modification of the existing institutional solutions. Both the institutional environment and the institutional system exert a strong influence on the ways in which arable land is used. To draw attention to these problems the author reviewed literature relating to the management of public goods, presented the determinants of increased conversion of land to non-agricultural purposes and made an attempt at defining and assessing the institutional options for rationalisation of the process of arable land's exclusion from production both in the short and long term.