Tanzania is among the countries with lower rural electrification rates. It is estimated that less than five percent of the rural population are using grid electricity services. This study assesses the contribution of rural electrification to household income in Moshi District, Tanzania. Specifically, the study aimed at identifying income generating activities undertaken using grid electricity, assessing the contribution of grid to household income as well as identifying the challenges in utilization of grid electricity services in income generating activities. A multistage sampling technique was used to select a total 120 (60 with grid and without grid services respectively) respondents for the study. The study identified among others, iron wedding, compact disc burning and grain milling as income generating activities influenced by presence of grid electricity. The household annual income ranged from 800 000 Tshs to 46 000 000 Tshs and there were statistically significant differences in income between households with grid electricity services and those without. In addition, the study identified reliability of services, high application standards, and higher bill as challenges associated with grid electricity services. The study concludes that grid electricity contributes to increased household income. Furthermore, the study recommends that, the government and development partners should secure necessary financial resources to invest in rural electrification.