Climate variability is a major challenge facing small-scale farmers in semi-arid of developing countries. Farmers employ various ways to cope with climate variability. However, scant information is available on livelihoods diversification to ensure livelihoods security. Livelihoods diversification is commonly acknowledged as the means to increase income. Therefore, this paper is an attempt to bridge information gap on livelihoods diversification among small-scale rice farmers in Bahi sub-basin. Analysing determinants of livelihood diversification, to better understanding farmers’ strategic behaviour in the event of climatic variability, is important for formulation of development policies. Qualitative and quantitative information were collected and analysed to validate the study objectives. A regression model was used to assess factors influencing livelihoods diversification. Findings show that climate variability increases likelihood of diversification, suggesting the importance of diversification as a response to constraints imposed by climatic variability. Unfavourable rainfall made farmers likely to diversify income. However, the study concludes that farmers have low asset ownership for livelihoods diversification; farm productivity is declining due to rainfall variability and an apparent lack of public investment in infrastructure to reduce the risk of rain-fed agriculture. Therefore, there is urgency for promoting water harvesting and irrigation; increasing access to agricultural-technologies; support diversification; and skills development.