Livestock production is an important contributor to rural development. In the past two decades, developing countries have experienced changes in market structures, climate and demographic characteristics. These changes have been accompanied by fast growth in demand for livestock products and the increasing dependence on livestock for sustainable livelihood systems. In response to these changes, there has been rapid land use and land cover changes, characterized by expansion of agricultural land, and land fragmentation. This has caused environmental degradation in several rural areas, including the River Njoro watershed. Policy makers and development agents are therefore, facing a dilemma on trade-offs between meeting the expanding demand for livestock products and sustainable utilization of the limited stock of natural resources. At the backdrop of this dilemma, this study sought to identify and characterize livestock production systems in Njoro River watershed using principal components and cluster analysis. A multinomial logistic regression model was then used to determine the factors that influence the spatial distribution of livestock production systems and Changes in Land Use Efficiency for Small extent (CLUE- S) model used to assess the effect of suggested policies on the spatial distribution of livestock production systems. Primary data used in the study was collected using a household survey. Data was managed and analyzed using Statistical Package for Social Sciences (SPSS) v15, STATA V9, and (CLUE-S) Modeling softwares. Results indicate that farmers in the watershed fall under three major livestock production systems: Intensive, Semi intensive, and Extensive. Land size, access to extension services, age of household head, altitude of the farm, distance of farm household to the river, number of extension visits, value of physical assets, access to credit, household size, household income, and involvement in off-farm activity are the factors found to significantly influence changes in livestock production systems. It was also observed that if the current trends in land use changes continue, the production of livestock products will continue to decline in the future. This study concludes that if the growth in food production has to surpass the population growth rate, relevant policy issues to enhance sustainable livestock production have to be addressed. Policy implications drawn from this study have focused on incentives for intensification, institutional reforms, improving livestock productivity, and innovations that enhance the synergies between livestock production and the environment.