This study analyzes the socio-economic and institutional factors influencing livelihood diversification among rural farmers in Kajuru Local Government Area of Kaduna state, Nigeria. The specific objectives were to examine the socio - economic and institutional factors influencing rural people to seek other sources of livelihood beside agricultural production in Kajuru Local Government Area of Kaduna State. It examines the nature and socio-economic characteristics rural farmers in Kaduna State, the sources of livelihood diversification of the farmers in the area, determines the socio - economic factors that influenced farmers‟ decision for livelihood diversification in the study area, and also the effect of livelihood diversification poverty reduction among rural farmers. Quantitative methods were collected through the use of questionnaires. The analytical tools employed include descriptive statistics, spearman rank correlation coefficient, Z - test and chi - square. Data were collected through the use of structural questionnaires administrated to 120 respondents who were randomly selected. Data collected were analyzed using frequency counts, percentage, average, spearman rank correlation coefficient, Z - test and chi - square. The findings reveals that (30%) of the farmers were operating at a low level of livelihood diversification, that is, were engaged in not more than one livelihood diversification activities besides farming.