Market socialism is an attempt by a Soviet-style economy to introduce market elements into its economic system to improve economic growth. It was first attempted during the 1920s in the Soviet Union as NEP, or the New Economic Policy, but soon abandoned. Later, elements of "market socialism" were introduced in Hungary (where it was nicknamed "goulash socialism"), Czechoslovakia and Yugoslavia (see Titoism) in the 1970s and 1980s. Modern Vietnam and Laos also describe themselves as market socialist systems. The Soviet Union attempted to introduce a market socialist system with its perestroika reforms under Mikhael Gorbachev prior to the collapse of the USSR in 1991.

Historically, market socialist systems attempt to retain government ownership of the "commanding heights of the economy" such as heavy industry, energy, and infrastructure, while introducing decentralised decision making and giving local managers more freedom to make decisions and respond to market demands. Market socialist systems also allow private ownership and entrepreneurship in the service and other secondary economic sectors. The market is allowed to determine prices for consumer goods and agricultural products and farmers and sometimes other producers are allowed to sell all or some of their products on the open market and keep some or all of the profit as an incentive to increased and improved production.

However, the Chinese experience with market socialism is another situation. The system introduced in the People's Republic of China by Deng Xiaoping in the late 1970s and has evolved into what some economists, outside of China, would argue is modern Chinese capitalism. See Socialism with Chinese characteristics.