ABSTRACT In Ethiopia 83 percent of small-holder farmers participated in farming activities and only 27 percent in non-farm economic enterprises.This paper examines the determinants of income diversification and its effect on food security in Asayita woreda Eastern part of Afar region. The study used two stages sampling in combination with stratified and simple random sampling procedures to select kebeles and households. The Simpson Index of Diversity(SID),Food Security Index(FSI), Fractional response model and Binary Logistic Regression model were employed to analyze the data collected from a sample of 153 rural households. While the Simpson index of diversity were used to measure the extent of income diversification and the food Security index is to measure the food security status. Income diversification level has positive and significant effect on food security status of the rural farming households in Asayita woreda. The level and type of income diversification depends on the accessibility and availability of different income sources. Similarly, food security depends on average Kcal per day consumed by all members of a household. The mean results of degree of income diversification revealed that Simpson Index of Diversity (SID = 0.24) by rural households in the study area. Further results of the head count index indicated that 60.1 % households were below the food insecurity line. The food insecurity gap and severity were 9.5 % and 2.6 % respectively. Based on fractional response model result educational status, credit utilization, distance from market, access to electric power, sex of the household head, annual household income, special skill and household size significantly affecting degree of income diversification. While the binary logistic regression model estimates indicate that distance from market, age, educational status, household size, farm size, livestock holding, credit utilization, remittance and annual household income have significantly influence on the probability of being food secure. Finally, this research indicates the important policy implications suggesting that programs, projects and/or any interventions designed targeting to engage people in other income generating activities would augment their income sources which are made to increase the food security status at household level in Asayita woreda. Keywords: Income diversification; food security index; fractional response regression; logistic regression; Simpson index of diversity