The study provides empirical evidence for the efficiency of the Swedish farms for the period 1998-2008, and examines how selected Common Agricultural Policy (CAP) measures and farm and farmers characteristics contribute towards improving the farm efficiency. Furthermore the study checks if the CAP support has accomplished to compensate differences among the farms originating from the agri-environmental production practices and the regional agricultural potential. Unbalanced panel of the Swedish FADN is used. The result reveals that technical efficiency of the Swedish farms is fairly high; COP, milk and pig farms have a possibility for an increase of the farm efficiency for about 10%. Highest possibility for improvements is registered for the cattle farms (17%). To improve the efficiency, COP farms need to grow in size, whereas cattle and pig farms need technological improvements. More efficient are farms managed by younger farmers, and lower specialization (below 70%) in milk and pig production. Pillar I and Pillar II support have a potential to decrease the disparities among the farms, therefore to help farm to achieve higher efficiency. Both under compensation and over compensation in some regions are detected, thus revision for the distribution of the CAP support is recommended.