The shift to market forces in East Germany has fundamentally reconfigured its social and economic geography. In particular, spatial inequalities between localities and regions have re-emerged forcefully in response to new values, expectations and preferences. Increased mobility through private transport, changing job opportunities, educational choices and desire for new housing qualities have inter alia created new parameters for the population's lives. The responses i.a. in the form of migration have altered demographic structures and spatial patterns of the population considerably, often varying significantly over relatively short distances within and between regions. After initial population losses generally through outmigration from East to West Germany, population losses in cities occurred in favour of suburban areas, and rural depopulation in favour of the cities; creating a highly differentiated basis for future development through new urban-rural contrasts and differences between urban regions. This paper will outline some of these processes and demonstrate their effects on the already-considerable inequalities inherited from communism. Attention will also be given to the effects of changing population structures and patterns on local government and the future prospects for an indigenously supported, sustainable economic development for regions and the likely pathways of transformation and adjustment.