This paper describes the development of labour market institutions and policies in seven Commonwealth of Independent States (CIS) countries and Georgia during the transition period up to the year 2007, thus characterizing the condition of these institutions at the eve of economic crisis. It shows that in many CIS countries, public employment services lost resources, staff, and authority during the transition period, which reduced their capacity to replace lost income for unemployed workers, or to redirect them to new or better jobs. This attrition of the PESs was mainly due to policy choices made early on in the transition process with respect to their source of funding and the overall design of labour market institutions. In the early 1990s with rapidly rising unemployment and job destruction accompanied by large-scale informalization of work, these countries adopted models from well-functioning developed economies, which were ill-fitted to the national environments. After almost two decades of transition, the typical outcomes in CIS include liquidation of insurance-based employment funds and shifting of expenditures to the state or local budgets, abolition or mergers of labour market institutions, and a partial replacement of unemployment insurance with targeted social assistance. The paper argues that an essential first step to alleviating the impact of recession-related unemployment in CIS countries is loosening eligibility criteria and improving funding for existing labour market programmes, followed by increasing the capacity of the existing national public employment services and establishing a regulatory framework for the proper functioning of private employment agencies.