In the present day urban expansion program is implemented in Ethiopia including Dessie City at large scale through intervention projects to achieve growth and transformation. However, availability of empirical evidences on the impact of urbanization of the city on its peri-urban community livelihoods is scanty. This research was carried out to examine the impact of urban expansion on the displaced households’ livelihood in Dessie City. In this study household survey data and focus group discussion were employed. Descriptive analysis, econometric results estimation with propensity score matching methods were used for ATT investigation. The logistic robust regression model was fitted to analyze the potential variables affecting urban induced displacement and for each of the key outcome indicators to analyze the displaced farmers’ livelihood outcomes in the study area. Statistical tests such as T-test, Chi-square, sensitivity etc tests were employed. Household survey data was collected from 298 (111 displaced and 187 non-displaced) households through random sampling proportionately from three kebelles of urban periphery villages. This study has found that the key outcome indicators signify the livelihood of the peri urban areas were negatively affected by urban expansion as shown in the treatment effect by observables factors. As the result, the urban expansion in its effect on total annual consumption expenditure has decreased for displaced households by Birr 3025.64 and livestock holding and eucalyptus tree assets were also depleted by 2.4 TLU and 18332.75 ETB, respectively. In contrast home durable furniture of displaced households is more than by Birr 1787.06, but, this could be due to displaced households use their compensation payment to increase their purchases of home durable furniture doesn’t indicate positive impact of improvement in their livelihood. The researcher recommend that compensation payment needs to be revised and beyond compensation relocation assistance needs to be focusing on sustainable source of income, job security and income for the farmers more to building long-term rehabilitation works in a fixed direction to sustain their livelihood. Effective urban land use & administration was also crucial on land saving & planning.