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Political Economy in anthropology is the application of the theories and methods of Historical Materialism to the traditional concerns of anthropology, including, but not limited to, non-capitalist societies. Political Economy introduced questions of history and colonialism to ahistorical anthropological theories of social structure and culture. Most anthropologists moved away from modes of production analysis typical of structural Marxism, and focused instead on the complex historical relations of class, culture and hegemony in regions undergoing complex colonial and capitalist transitions in the emerging world system.

Political Economy was introduced in American anthropology primarily through the support of Julian Steward, a student of Kroeber. Steward’s research interests centered on “subsistence” — the dynamic interaction of man, environment, technology, social structure, and the organization of work. This emphasis on subsistence and production - as opposed to exchange - is what distinguishes the Political Economy approach. Steward's most theoretically productive years were from 1946-1953, while teaching at Columbia University. At this time, Columbia saw an influx of World War II veterans who were attending school thanks to the GI Bill. Steward quickly developed a coterie of students who would go on to develop Political Economy as a distinct approach in anthropology, including Sidney Mintz, Eric Wolf, Eleanor Leacock, Roy Rappaport, Stanley Diamond, Robert Manners, Morton Fried, Robert F. Murphy, and influenced other scholars such as Elman Service, Marvin Harris and June Nash. Many of these students participated in the Puerto Rico Project, a large-scale group research study that focused on modernization in Puerto Rico.

Three main areas of interest rapidly developed. The first of these areas was concerned with the "pre-capitalist" societies that were subject to evolutionary "tribal" stereotypes. Sahlins' work on hunter-gatherers as the "original affluent society" did much to dissipate that image. The second area was concerned with the vast majority of the world's population at the time, the peasantry, many of whom were involved in complex revolutionary wars such as in Vietnam. The third area was on colonialism, imperialism, and the creation of the capitalist world-system.

More recently, these political economists have more directly addressed issues of industrial (and post-industrial) capitalism around the world.

Theory