The purpose of this study is to characterize municipalities with a high share of LFAs (specific type zone I) as well as to assess the functioning of farms located in such municipalities against the background of analogous farms in non-LFA municipalities which kept accounts for the Polish FADN continuously in 2016-2018. The first part of the study describes the method of determining and characterizing areas with natural constraints (LFA) of specific type located in zone I in Poland designated by the Institute of Soil Science and Plant Cultivation – NRI (IUNG-PIB) on behalf of the Ministry of Agriculture and Rural Development (MRiRW) and the European Commission (EC). These areas were determined on the basis of the threshold values of the Nature and Tourism Index (WCPT) and the Index for the Valorisation of Agricultural Production Area (WWRPP). They have functioned in our country since 2019 and include 1233,7 thousand ha UAA. The second part of the study presents the functioning of farms located in municipalities with a high share of LFAs (specific type zone I) (at least 80% UAA LFA specific type zone 1 in total UAA) against the background of analogous farms in non-LFA municipalities that kept accounts for the Polish FADN continuously in 2016-2018. It was found that farms located in LFAs are characterized by lower capital value, older farm owners, and poorer quality of used soils. In addition, they incur lower costs per 1 ha of UAA, have worse production effects and lower factor productivity. Moreover, they have lower income per 1 ha of UAA, and thus smaller development opportunities.