The empirical study examines the nature and extent of property rights institutions emerging in the process of diversification of tribal economy of Arunachal Pradesh as a result of state-led development interventions. What is evident in the study is that the institutions emerge as a consequent of development interventions to meet the institutional requirements of such interventions subsequently. The study finds that the relationship between property rights and production efficiency has not been uniform in three sectors of the economy with a discernible positive relationship in agricultural sector and erratic trend in both secondary and tertiary sectors. Further, some features have emerged which did not exist earlier; with the establishment of property rights in land inequalities in the ownership of land, income and capital have emerged. So the inference, though implicit, points to the logic that positive and desirable relationship between property rights and production efficiency depends on enabling environment - the existence of both necessary and essential prerequisites.