<p>Semi-natural grasslands and wooded pastures are biodiversity-rich but declining habitats that depend on continued management, mostly by farmers. In the EU, agri-environmental schemes (AESs) under the Common Agricultural Policy are key instruments for conserving these habitats. We examined how the design and implementation of the Finnish AES for semi-natural habitats align with EU restoration objectives and farmer decision-making and behaviour. To our knowledge, this is one of the first studies to combine farmer survey data on motives and knowledge with evaluations of management performance, site characteristics, and payment design. Results show that the scheme provides significant additionality, but habitat management remains unprofitable or a low economic priority for most farmers, and weaknesses in payment design, contract management, and enforcement constrain targeting and restoration outcomes. We conclude that achieving EU restoration targets will require increasing the relative economic importance of habitat management, redesigning payments, and improving contract management and enforcement.</p>