Agricultural output commercialization has been found to have positive impacts on the income generating activities of household in sub-Sahara Africa. This paper examines the extent of agricultural produce commercialization and its impact on the household income generation vis-à-vis household welfare in the rural areas of Osun State. Data from 200 randomly selected rural households were analyzed with descriptive statistics and Tobit regression analysis. Results from the data analysis revealed that 74.3% of households commercialise their farm produce, though at different levels. As a measure of household welfare a food poverty line of N1615.92 per month/adult equivalent was obtained and 63.2 % of the rural households were below this line. Tobit regression analysis revealed that extent of agricultural output commercialization was one of the significant variables that affected the poverty status of households in the study area. The paper concluded that there was high rate of agricultural output commercialization among households in the study area and this definitely affected their welfare statuses. It is therefore recommended that policies aimed at improving household welfare should be centered on increasing farm output and developing a competitive market for agricultural produce in the study area.