Smallholder farm households face an increasing need of looking for alternative income sources to supplement their small scale on-farm incomes. However, livelihood diversification is a complex phenomenon and it involves different forms. This study, therefore, delves to realize the patterns of livelihood diversification strategies adopted by the smallholder farmers at Kembata-Tembaro zone, Southern Ethiopia. The study was based on cross-sectional survey data from 384 farm households that were selected through a combination of three-stages: cluster, simple random, and proportional to the size of population sampling techniques. A mix of instruments including interview- schedule, focus group discussions, key informant interviews and field observations were used to acquire primary data. Descriptive statistics in combination with multidimensional approaches involving cluster analysis were used to analyze the quantitative data. The qualitative data were analyzed using word descriptions and verbatim discussions. It was found that the diversification patterns of the smallholder farm households in the study area took different forms involving alteration of land use patterns, intensification of crops and livestock productions, and non/off-farm activities. Superiority order of livelihood strategies in terms of the average annual cash income obtained by the households was set. Accordingly, commercial crop stands first followed by livestock rearing and subsistence crop production as second and third, respectively. It was suggested that livelihood diversification can only be a viable strategy to achieve sustainable rural livelihoods if the farmers are capacitated so that they can choose the right remunerative livelihood strategy among the existing options.