This article is concerned with the function of the service industries in the transition from a Soviet planned economy to a market-oriented Western type of economy. In particular, it will examine the role of the tourism industry in economic transition in Estonia between 1985 and 1995. The economics of transition have hitherto been largely viewed within the context of a macroeconomic orthodoxy—an orthodoxy which has made use of the 'success story' of the Estonian economy to underline the validity of its point of view. This contribution will offer an alternative view of a successful instance of transition from a microeconomic perspective, and will suggest that the service sector—including tourism—was perhaps the transition catalyst. A large part of the content is based on personal research conducted in Estonia in the period 1992, 1995 and 1996.