<p>The huge increase in deforestation rates in the Brazilian Legal Amazon, caused by the expansion of agricultural activities, has deeply influenced the development of governmental actions in the twenty-first century, as evidenced by the institutional environment based on legal enforcement and agent punishment. Here, we examine the spatial impact of policies, command-and-control, and market mechanisms on deforestation at both the municipal and regional levels in the Brazilian Amazon. Using a panel dataset from 2001 to 2021, this study compared a panel data Ordinary Last Square (OLS) to a spatial econometric approach to determine whether proximity between municipalities and regions affects agents’ decisions. The results indicate that command-and-control operations coordinated at the regional level, the establishment of protected areas, and new market-oriented institutions that constrain economic agents’ environmental compliance, such as rural credit policies, had positive effects on reducing deforestation. However, market prices and incentives continue to incentivize the expansion of agricultural activities, resulting in increased forest loss. The traditional model of legal enforcement has proven insufficient in recent years, and it is recommended that new institutions consider expanding the use of market mechanisms to complement government policies.</p>