A Dissertation Submitted in Partial Fulfillment of the Requirements for Award of the Degree of Master of Science in Economics of Mzumbe University 2013The main objective of this study was to assess the various factors that influence participation of households in local economic development income generating activities as well as poverty reduction in the study area of Mwanza region. Two districts were purposively selected basing on the availability of households who participated in local economic development projects. These districts are Misungwi and Sengerema. To better inform, this study employed a sample size of 240 households to determine the factors which influences household participation in local economy and poverty reduction. The study revealed that most of the surveyed households participated in small business with participation rate of 38 percent and income share of 61.4 percent of the total income from household participation in local economy. Local economic development projects perceived to be important economic activities for income generation that assisted the households to finance some of their basic needs such as education 28 percent, food 29 percent, medical services 22 percent and clothing materials 21 percent. Tobit regression analysis was applied to investigate factors that influence households’ decision to participate in local economic activities. The results indicated that household participation in economic activities is significantly influenced by land size, amount of loan, location, other income and age square of household head. For the improvement of the programme there is a need to invest in education and rural infrastructure. Also, attention should be taken into account on the availability of sustainable markets, capital mobilization, accessibility of loans, women empowerment and support on research activities in local economic development programme.