Bolivia’s agribusiness leaders have described the move as "unilateral and political." But Mr Morales said the public land distribution program was not negotiable.
Mr Morales recently shocked foreign companies by going ahead with the nationalisation of Bolivia's vast natural gas industry.
The socialist leader issued seven decrees to immediately hand 2.5 million hectares of state-owned land to poor farmers in the eastern departments of Santa Cruz, Pando and Beni.
In a speech in the eastern city of Santa Cruz, the main town of Bolivia's richest region, Mr Morales warned that the distribution of public land was the first step in the agrarian revolution.
"I want to warn the business leaders that the reversion of unused, unproductive lands will be the second step," said Mr Morales.
Bolivia’s leader wants to give about 20 million hectares of land to poor farmers by the end of his mandate in 2011, most of which is in the hands of large landowners and property speculators, according to official figures.
Mauricio Roca, vice president of the powerful Eastern Agricultural Chamber of Commerce, criticised the move as unilateral.
Mr Roca, in an interview published in La Razon newspaper Sunday, lamented that, "Morales let himself be carried by the temptation of doing politics with land instead of establishing a national policy reached with all sides of the rural sector."
The government and agribusiness leaders from eastern provinces broke off talks on Friday on the Morales administration's land distribution plans.