This study undertakes a meticulous examination of the Livelihood Strategy Diversity Index (LSDI) and its nuanced implications on household welfare in heterogeneous regions of rural Vietnam. Employing a unique panel dataset derived from the Vietnam Access to Resources Household Survey (VARHS) spanning from 2010 to 2018, the study employs both Ordinary Least Squares (OLS) and instrumental variable (IV) methods to investigate the intricate relationship between LSDI and household welfare, with a specific focus on income and dietary diversity. The empirical findings reveal compelling evidence of pronounced regional heterogeneity, highlighting the distinctive impacts of the LSDI on household welfare across diverse geographical areas. This study underscores the importance of region-specific strategies, advocating for a tailored and diversified approach to agricultural activities aligned with the unique context of each region. Furthermore, the findings emphasize the pivotal role of consolidating small plots as a strategic measure to alleviate agricultural land fragmentation, offering valuable insights into region-specific interventions for the enhancement of household well-being, encompassing both income and nutritional diversity.