Cotton production in the European Union (EU) is limited to areas of Greece and Southern Spain (Andalusia). The 2004 reform of the EU cotton policy severely affected the profitability of the crop. In this article we analyze how the introduction of genetically modified (GM), insect-resistant cotton varieties (Bt cotton) might help EU cotton farmers to increase profitability and therefore face the cotton policy reform. We first study farmers' attitudes toward adoption of Bt cotton varieties through a survey conducted in Andalusia (Southern Spain). The results show a positive attitude of Andalusian cotton farmers toward the Bt cotton varieties. Second, we perform an ex-ante analysis of the effects of introducing Bt cotton in Andalusia. Finally, we integrate the analysis of the effects of Bt cotton with the analysis of the EU cotton reform. Our results show that despite the significant economic benefits of Bt cotton, the current policy reform is likely to jeopardize the profitability of cotton production in the EU.