Using empirical information, the present paper aims to outline the complex relationship between the small and medium enterprise (SMEÕs) and the environmental regulations in Chile. The specific sectors that contribute mostly to the environmental deterioration are identified. A general picture of SMEÕs with regard to environmental protection requirements is drawn. The conclusion is that the best approach to the subject is through the concept of sustainability. In other words, there has been an unsuccessful definition of public policies and establishment of management practices among firms when the environmental problem is addressed isolate. The economic conditions of SMEÕs as well as its vital contribution to social matters, particularly the generation of employment, requires an integrated approach. Finally, the paper points out some possible ways of action in terms of public-private cooperation to reach the objective of improve the environmental performance of SMEÕs in the context of a sustainability framework.