PhD ThesisIn many countries, rural transformations are being shaped much by rural towns and small cities due to the role played in boosting the rural non-farm economy. Rural transformation involves a comprehensive societal change whereby rural societies diversify their economies and reduce their reliance on agriculture because of pressure that is exerted on agricultural land by diversified activities and hence rural societies participate more in non- farm activities. This study is aimed at evaluating non-farm livelihood diversification and rural transformation in Kibaigwa emerging urban center. Specifically, the study is aimed at analyzing the contribution of non-farm livelihood activities to rural transformation, analyzing factors influencing participation in the non-farm livelihood activities, analyzing constraints associated with livelihood diversification in the study area. A random sample of 376 households was drawn from 6 177 households in five sub-villages or streets which are in Kibaigwa township. 313 (83.2%) of the total respondents were employed in non-farm activities. Independent sample t-test statistic and descriptive statistics indicate that the mean income from household engaging in non-farm activities was 329 789 TZS which was larger compared to the mean income of 55 189 TZS earned by household engaging in farming activities. The logit regression was used to determine factors influencing the participation in non-farm livelihood activities where education level and age of the household head were among the influencing factors. Moreover, initial and running capital and credit were among major constraints associated with livelihood diversification in Kibaigwa emerging urban center. The study concluded that non-farm activities contribute to rural transformation by providing high income to household’s income and employment activities. It is recommended that improvement of infrastructures like roads and electricity could facilitate transportation and growth of agro industries in the study area.DANIDA