This study is motivated to find explanation that agricultural sector alone cannot ensure sufficientrnemployment or sufficient income for the rural population. It attempts to suggest the need forrnintegrating agriculture with off-farm sector so that they reinforce each other's growth andrncontribute to poverty alleviation.rnThe specific objectives of the study are to investigate factors influencing the probabilityrnof involvement in off-farm employment at household level, and to measure the impact ofrnoff-farm employment on rural poverty alleviation.rnA survey data collected by the Ministry of Social and Labor Affairs on off-farmrnemployment (wage and self-employed non-farm activities) in 1996 is used for analysis.rnFarm household model is constructed to see how the farmers in the region allocate theirrntime endowment for farm work, off-farm work and leisure. Moreover, a log it regressionrnmodel is fitted to measure the effect of the determinants of the probability of off- farmrnemployment. The factors are broadly divided into household ,farm, financial and locationrncharacteristics.rnAmong the household characteristics, the household size and religion (OrthodoxrnChristianity as against other religions) are found to influence positively the involvementrnof household members in off-farm economy. To the contrary, marital status (marriedrnhouseholds against non-married households) and employment status (own account workrnagainst others) are found to influence negatively the probability of participation in off farmrnsector.rnFarm characteristics such as size of cultivated land for cereal crops, coffee and chatrnproduction, fertilizer use and number of cattle, have negative effect on the probability ofrnengagement in off-farm sector. This implies that better off farmers with the above farmrnresources are less likely to participate in off-farm employment as compared to farmrnresource- poor households. Hiring in causal labor is positively related with thernprobability of off-farm work.rnCredit recipients are found to participate more likely in off-farm activities than non recipientrnhouseholds. This dictates the need to expand credit facilities to ruralrnhouseholds to enable them diversify sources of their employment or income and hencernescape poverty.rnRelative poverty is measured with the help of FGT (Foster -Greer-Thor beck) modelrnbased on the annual income of 1668 sample households. The measurement result showsrnthat poverty is severe in rural Oromia. Nearly 65% of the sample households found to bernpoor. Nevertheless, poverty measures vary across employment categories, namely farm,rnoff-farm and dual employment.rnThe results of the study suggest that the determinants of off-farm employment need to bernaddressed in view of integrating off-farm employment with fann employment. More over,rnnarrowing the livelihoods gap between the rural households need to be the major focus ofrnthe Regional Government's development agenda.