The adoption of new income generating activities is a critical livelihood diversification strategy for many small farming households in developing countries. However, innovation adoption in a rural context typically involves complex processes and complicating factors, and rates of discontinuation can be high, with consequent wastage of public and private resources. This paper describes (1) the development of a new conceptual framework with which to analyse the complexity of adoption of new livelihood strategies, and then (2) describes its application in a case study involving mushroom cultivation by smallholder farmers in Vietnam. The new conceptual framework, termed Rural Livelihood Adoption Framework (RLAF), is based on a combination of DFID's Sustainable Livelihoods Framework, Ellis' Rural Livelihood Framework and Rogers' Diffusion of Innovations theory, to capture multi-dimensional factors including livelihood assets, innovation attributes, livelihood outcomes, livelihood systems, vulnerability, and policy and institutional contexts. The application of RLAF to the selected case study of adoption of mushroom cultivation in rural Vietnam enabled systematic and comprehensive description of the livelihood trajectories of the innovation adopters, and identification of critical factors and ways in which those factors influenced adoption behaviours at each stage. It also provided the basis for developing strategies to overcome sustained adoption constraints and barriers. The RLAF is thus an analytical tool with considerable utility for identification of systemic problems impacting on rural livelihoods in developing countries, and for devising effective and relevant solutions.