Throughout the 20th century, many Palestinian peasant households chose to grow tobacco commercially. This was especially true for the early 1920s, the years of the “tobacco rush.” However, the skill of these Arab Palestinian growers was a debated matter. Within newly established capitalist relations in a settler-colonial context, skill and expertise were a reflection of the power structure in which they were embedded. Europeans (e.g. British officials, Jewish settlers, and cigarette manufacturers) perceived peasants to be unskilled and unproductive. They believed peasants used “primitive” methods, were inexperienced with tobacco cultivation, and were unable to improve, and therefore diminished the quality of tobacco, and set the whole industry back. Tobacco companies used grading scales to decide the prices paid for tobacco according to quality, more often than not deeming local Arab crops as inferior to imported tobacco. Peasants countered their negative characterization using a multiplicity of not only discursive, but also material means which boosted their pride in their craft and lifestyle, while creating new ways to provide for their families. Peasants believed that as natives, they were most familiar with the landscape and climate, and that peasant households were the production units best-equipped for the job. Peasants additionally invested in alternative markets and customers; they decided between the long-existing informal markets of “smuggled” tobacco (present since the Ottoman period) on one hand, and state-sponsored monopolized production on the other. Based on archival and oral history research, I argue that the real or perceived ability of peasants to adequately grow quality tobacco drove them to carve out an alternative economic sphere, which deeply affected the revenues of both the state and tobacco companies, and troubled the formal market.