The employment pattern and income sources have been reported in the rural areas of Punjab, based on the primary data collected from 315 rural households. The results have revealed a negative relationship between employment diversification and size of landholding. Distress nature of the rural labour markets has induced casualization of work in the absence of land for cultivation. A majority of the households have been found dependent on multiple sources of income, further confirming the distress nature of these income sources. The dependence on non-farm sector as a major source of income has revealed a negative relationship with the land-size. More than two-thirds (66.9%) of the non-cultivating households have non-farm sector as the major source of their income. The results have further revealed the inability of an average non-cultivating and marginal or small cultivating household to achieve the overall average income of a rural household. The rural household income has been found to follow a highly skewed distribution. The incomes from crops and dairying have been observed highly unequally distributed, perhaps due to their strong association with the size of landholding. On the other hand, rural non-farm income distribution seems to be least skewed.