Fostering rapid and sustained agricultural growth in the rural area is the prime focus of the policy maker in many developing countries and especially in India for two important reasons. One, though the contribution of agriculture in the gross domestic product is declining still majority of the rural household depends directly on agriculture for their livelihood. Secondly, sustain agricultural growth is strongly associated with the reduction of poverty in India. One way to achieve a sustain growth with a higher level of income in rural economy is to diversify from farm to non-farm sector. Another emerging trend is diversification within the farm towards commercial crop. Many studies have looked at rural structural transformation separately through the lens of diversification from farm to non-farm sector or through diversification within the farm sector. But there is hardly a study that has tried to analyse the rural diversification jointly. This paper tries to study the rural structural transformation in Nagaland through two process- diversification from farm to non-farm and diversification within farm sector towards commercial crops. The study will also try to analyse empirically on the factors responsible for the household to diversify through the two processes. The present study uses the National sample Survey’ (NSS) unit level data on Employment and Unemployment survey and DES, Govt. of India for secondary data. 200 household’ field surveyed data with structured questionnaire is used for primary data. The rural occupational diversification in Nagaland has peculiar characteristics as compared to the all India level. It is found that the diversification is mostly dominated by regular salaried employed and non-farm self-employed unlike in the case of India, where household diversify generally towards casual nonfarm job which are informal in nature. These two processes for rural transformation have a larger policy implication for the poverty reduction and growth.