The background of this research was the increase of modern market development in Kabupaten Sleman that changed the human lifestyle in providing their needs that increased day by day. This research was to analyze the effect of modern market development toward the performance of small and medium micro entreprises or (UMKM) in Kabupaten Sleman. This research combined the quantitative and qualitative method. The evaluation of quantitative effect used difference-in-difference method that was common to be used to evaluate effect. The qualitative analysis was conducted in the form of indepth interview with the key informants, and then the researcher analyzed it according to Islamic economy perspective. The result of this research indicated that distance and price factors between UMKM and shopping center was very determining, UMKMs located near shopping center had the biggest negative influence especially in the decrease of profit, turnover, and the total number of consumers but not in the total number of employees.