Agriculture constitutes a significant amount of the Kenya’s Gross Domestic Product (GDP). However, a major characteristic of Kenyan agriculture is the predominance of primary production with a high concentration of women in the sector. Peanut production for instance is widespread in western Kenya under rural crop production system; serving as a cover, subsistence and commercial crop. As a commercial crop, peanut has the potential of generating income for rural households and thus help in reducing poverty and improving livelihoods. Moreover, higher incomes can be obtained through value addition activities. Despite the known benefits from value addition, farmers produce and market peanuts with little or no processing. Using survey data from 310 randomly selected peanut producers from two divisions; Ndhiwa and Rongo; a Propensity Score Method (PSM) was used to determine the gendered effect of peanut value addition on household income. From the results, farmers were found to undertake only one form of value addition, shelling. Although they appreciated the higher profitability associated with other forms of value addition like processing, inadequate capital to purchase processing equipment was a major constraint. The PSM results suggest that value addition raises household per capita income by Kshs.88 per day. Male headed households recorded higher levels of income compared to female headed households. This indicates that potential exists in peanut value addition as a possibility to raise farmers’ household incomes. However, a diversity of value adding options should be promoted for adoption by farmers to sustainably improve peanut farmers’ livelihoods.