This study is motivated by the existence of limited empirical evidence pertaining to incomerndiversification strategy of urban households in Ethiopia. The specific objectives of the studyrnare to characterize labor income diversification strategy of poor urban households in Ethiopiarnas well as to identify and explain the major determinants of the same. A longitudinal surveyrndata collected by the Department of Economics of Addis Ababa University in collaborationrnwith Economics Department of Gothenburg University from 1997 to 2004 was used for thernstudy. A conceptual model of moonlighting in a household context was adopted. Variousrndescriptive statistical tools such as frequency distribution were employed. Moreover, arnconditional fixed effects Poisson regression model was estimated. Smaller proportion ofrnsample households were found to be dependent on multiple labor income sources comparedrnto some other African urban areas. However, a trend of increased reliance on the same overrntime was also observed. In general, exposure to an external income shock was not found tornhave the expected positive and statistically significant effect upon income diversification.rnHowever, presence of non labor income source was found to have significant and negativerneffect up on income diversification efforts as expected. These indicate that incomerndiversification was not an important household strategy for the sample of poor urbanrnhouseholds considered in the study. On the other hand, access to credit especially in therncapital city was found to be associated with income diversification than with expansion ofrnexisting income sources. The study has such policy implications that the practitioners of therninformal sector into which most poor urban households diversify their income source forrndistress and poverty reasons need to be supported. This could be through improving theirrnaccess to credit, technology, training and marketing in order to strengthen their productiverncapacity to create jobs and generate income. Moreover, provision of some sort of businessrnrisk mitigation scheme for poor urban households of especially the capital city need to bernenvisaged through facilitating formation of joint ventures or cooperatives.