This paper describes and analyses the structure of illegal forestry in Estonia in 1998–2002. A short background detailing the terms related to illegal forestry is followed by an analysis of the causes of illegal forestry in Estonia and their relationship to the post-Soviet policy reforms. The structure and dynamics of illegal forestry are then described. Field studies, interviews and document analyses provide an overview of the estimated extent of selected forms of illegal forestry. The results indicate that over 50% of the timber extracted from private forests during 1998–2002 was likely to have been related to one or more forms of illegal forestry as forest theft, environmental damage or tax violations. The role of the forest resource use policy in creating a favourable situation for emergence and expansion of illegal forestry is then discussed. It is concluded that post-Soviet liberal policy reforms have enabled illegal forestry to emerge, while political reluctance to acknowledge the whole scope of illegal forestry activities has obstructed the application of efficient countermeasures.