The study carried out in the Kullu district of Himachal Pradesh has examined the extent of changes in cropping pattern and their effect on income and employment over the period 1990-91 to 2002-03. Data collected through the three-stage stratified random sampling technique have been used to analyze the impact of diversification and commercialization over time. The average farm-size has reduced from 0.80 hectares to 0.59 hectares during this period. The cereal-dominated cropping pattern has been replaced by vegetable-based cropping pattern, the area under cereal crops being declined from 59 per cent to 5 per cent. The cropping intensity has increased from 197 to 225 per cent. Cauliflower, cabbage and tomato are the major crops occupying the total cropped area. As the vegetable crops are highly labour-intensive, the annual labour requirement has increased by about 49 per cent. The labour requirement during kharif, rabi and zaid seasons has increased from 98.9, 90.0 and 10.0 mandays in period-I (1990-91) to 115.5, 113.8 and 64.0 mandays, respectively in period-II (2002-03). The per farm annual income has increased more than three-times, from Rs 31,240 to Rs 1,35,160 over this period. The labour employment as well as the contribution to total income have been found highest in cauliflower, followed by cabbage and tomato, though pea is reported to be the most labour-intensive crop and tomato has turned out to be the most paying crop per unit of area. This hike in income level, which is due to agricultural diversification, has raised the living standards of the farmers of this area.