The dramatic societal, infrastructural and institutional changes associated with the transition to a hydrogen economy and the actions that must be taken to capitalize on the transition have been analyzed by a number of studies in many countries ranging from rhetorical visions to full technology roadmaps. As yet no such study has been undertaken in Portugal. This paper ascertains that Portugal needs to fully understand the potential that it has to develop a "hydrogen economy", and to take steps for this technology transition. An analysis is made of the current Portuguese energy system and policies in the light of the key technology transition challenges towards a hydrogen economy. The current status of hydrogen technology development is compared with that of other countries, and potential production to end-use hydrogen chains are examined. Key areas of promise for hydrogen technologies in Portugal are identified. The paper concludes with recommendations for actions to begin the process of transition towards a "hydrogen economy". (C) 2007 International Association for Hydrogen Energy. Published by Elsevier Ltd. All rights reserved.