In recent years, Canada has witnessed a rapid growth in short food supply chains. As in other countries, such marketing channels have emerged in Canada in response to a growing demand among consumers for fresh, local products. However, a unique feature of Canadian agriculture is that dairy, egg, and poultry production are under supply management. The government requirement for producers in these sectors to purchase a quota ensures that output matches domestic demand. Until recently, though, little attention had been paid to how this system affects the development of short food supply chains in the country. The purpose of our study is to examine this emerging issue. The results of our policy analysis suggest that small farmers in Canada face multiple challenges when seeking to produce and market specialty products that are under supply management. Furthermore, the cost of entering supply-managed sectors for producers varies as each province is responsible for establishing its own quota exemption limits, minimum quotas, and new entrant programs. Our study indicates that supply management policies have important implications for local and regional food system development and for food diversity in Canada.