The objective of this study was to examine extent and determinants of income poverty in selected rural villages located in different parts of the country. Data were collected through a detailed structured household survey, and descriptive statistics and econometric modelling were employed to analyze the data. Results confirm that there was abject rural poverty in the study areas; annual average per capita income was estimated at Birr 1092.30 (1.0 USD ~9.6 Birr). Some 66 per cent of the sample households (n = 240) were found to be below a poverty line, defined in official documents and adjusted for inflation in this study. The analysis of determinants of household poverty showed family size, land and livestock holdings, diversification in crop production, engagement in non-farm activities and utilization of microfinance services to be important correlates. Increased livelihood asset holdings, in terms of land and livestock, crop diversification, and engagement in non-farm activities were positively related to improved household welfare. Differences in community level natural resource endowments in terms of quality of land resources and microclimatic conditions appeared to have significant influence on the probability of households to be non-poor, through its impacts on crop productivity, as annual incomes were higher in villages where crop production constituted the primary source of household income. These results underline the importance of enhancing the poor's livelihood asset endowments, agricultural intensification, livelihood diversification and pursuing of geographically differentiated strategies in poverty reduction efforts. The need for promoting family planning was also shown by the inverse relationship between household sizes and poverty status of households.