A Dissertation Submitted in Partial Fulfillment of the Requirements for the Award of the Degree of Master of Public Administration (MPA) of Mzumbe University.This study was about the contribution of informal sector on poverty reduction in Tanzania paying specific attention on street vendors in Ilala Municipal Council. The study was guided by four (4) specific objectives, namely: To find out types of informal sector activities performed by street vendors of Ilala Municipal Council; to determine the average income that street vendors in Ilala Municipal Council set; to explore the extent to which street vending business contributes to poverty alleviation among the street vendors in Ilala Municipal Council and to identify factors that limit street vending activities. Case study research design was employed in this study and the sample of 99 respondents was selected using purposive and accidental sampling techniques. Questionnaires, interviews and documentary reviews were used as data collection methods. Analysis was done using descriptive statistics for quantitative data with the aid of both SPSS and MS-Excel while for qualitative data, content analysis was used. The findings indicated that, several types of informal sector activities were performed by the street vendors in Ilala Municipality ranging from selling of second hand clothes, second hand shoes and other items such as bags, plates, glasses, spoons and alike. With regards to average income, it was found that, most of street vendors earn between TZS 5000 and TZS 10,000 per day through street vending business. The study further showed that, street vending business contributed to poverty reduction through self-employment. Moreover, factors which limited street vending activities include lack of financial support, lack of entrepreneur skills, lack of government support and lack of policy related to informal sector. The study concludes that despite the fact that the informal sector has often been described as economically stagnant and unproductive, but to some extent has positive impact on poverty reduction. It is therefore recommended that government should encourage NGOs, financial and microfinance institutions to provide credit and financial support to the street vendors so as to expand their businesses