Two years after the enlargement of the EU a certain pattern has emerged in the labour migration streams from the new EU member states to the Nordic countries. Individual labour migration is growing, but varies strongly among the Nordic countries. Labour mobility related to services has increased strongly, and seems to exceed regular labour migration in key sectors. In a context of strong growth and emerging labour shortages, the Nordic economies and labour markets have clearly benefited from the growing influx of labour but also faced new challenges in terms of regulation, enforcement and control of working conditions for posted workers. At the European level the implementation of the Posting of Workers Directive 96/71/EC is under evaluation, the Laval/Vaxholm case is pending in the European Court of Justice, and the proposed Services Directive accentuates questions concerning the control of conditions for posted workers. In parallel, several Nordic and other European countries have repealed the transitional arrangements for individual labour migration, and many other countries have signalled a gradual lifting of their arrangements until 2009. Also these changes will confront parts of Nordic working life with demanding tasks in securing equal treatment for foreign workers. The purpose of this report is to give an overview of the development in the Nordic labour markets during the first two years after EU enlargement, and sketch some of the main challenges the Nordic labour market models are facing in the open European labour market. The report is prepared on the basis of the cooperation within a Contact Group under the Labour Market Committee of the Nordic Council of Ministers, and is written by Jon Erik Dølvik and Line Eldring (Fafo), who have coordinated the work of the Contact Group.