This article examines the theoretical foundations of poverty reduction through the development of the service sector. The service sector is recognized as an effective tool in combating poverty by promoting economic growth, increasing employment, and fostering entrepreneurship. The article analyzes various approaches to poverty reduction, including economic growth, education and professional development, improvements in healthcare services, financial inclusion, and social protection programs. Specifically, it explores opportunities and strategies for reducing poverty in the Republic of Karakalpakstan through the expansion of the service sector, highlighting the significance of tourism, information technology, transport and logistics, entrepreneurship, and vocational education. The article also provides practical recommendations for the development of the service sector based on government policies and International experiences.