Stagnant agricultural productivity and low returns in farming have led rural residents in Nepal to look elsewhere for alternative or supplemental income opportunities, primarily though off-farm employment. Off-farm employment provides supplemental income to support household expenditure. This study examined the contribution of off-farm employment to total household income for two ecologically distinct districts of Eastern Nepal and identified factors differentiating households with on-farm, off-farm and, both on-and off-farm labour. Variables that differentiated wage labour, skilled labour and trade employment were determined. Participatory rural appraisal workshops (n=6), key informant interviews (n=9) and household socio-economic surveys (n=150) were used to gather data. The lacks of productive land, increased household sizes and higher educational attainment of household members were all positively associated with off-farm employment. There were fewer employment opportunities in locations away from major market centres and for women and disadvantaged groups. The Brahmin/Chhetri/Newar ethnic group dominated most of the off-farm employment opportunities. The study suggests that policy intervention measures such as the provision of irrigation and skill-based training would improve the well-being of rural women, disadvantaged people sub-groups and those located away from major employment centres. Market linkages are also an important factor in increasing off-farm employment opportunities and thus household income.