Poverty in Ethiopia is one of the pressing problems catching the attention of the government,rndevelopment practitioners and researchers for more than two decades and will draw thernattentions in the years to come. This study aims to explore the extent of poverty and examine thernlink between poverty and livelihoods of households in small towns of East Gojjam guided byrnsustainable livelihoods framework. The study was based on quantitative and qualitative datarngenerated from both primary and secondary sources. The sample for the survey was selectedrnusing two-stage sampling technique. In the first stage, the study towns was selected purposivelyrnbased on set criterion and in the second stage, 328 households were selected using simplernrandom sampling technique after the sample size was statistically determined. In contrast, in thisrnstage key informants and group discussants were selected purposively. Questionnaire survey wasrnused to generate mainly quantitative data and key informant interview, group discussion andrnobservation were employed to generate qualitative data from the selected primary sources. Thus,rnboth quantitative and qualitative methods of data analyses were employed for the study.rnDescriptive statistics such as percentages and mean and inferential statistics such as chi-squarerntest, independent t-test, one way ANOVA and logistic regression were employed to analyze thernquantitative data. In addition, indices for the multidimensional poverty and livelihood securityrnwere constructed. Direct quotation, paraphrasing and pattern matching were used to analyse thernqualitative data. The study, therefore, found that the incidences of consumption andrnmultidimensional poverty were 37% and 55% respectively. The chi-square test shows thernabsence of significant differences among the incidences of poverty of the study towns though thernpercentages show some differences. Both the poor and the non-poor households were deprived ofrnthe productive assets though the poor were more deprived. The chi-square tests and t-testsrnconfirmed that these differences in the asset possessions between the poor and the non-poor werernstatistically significant. About 9 out of 10 households were self-employed, 70% of the businessesrnwere non-licensed and the place of work for 30% of the businesses was residential house andrncompound. The study also found that the livelihoods of about half (50%) of the households wasrnimproved due to largely better profit from their businesses and the livelihood of 20% of thernhouseholds was decreased due to shocks. Households pursue a living from agricultural landrn(32%), grazing land (25%), cooking energy (33%), quarrying site and social assets from thernrural areas. Agriculture was the primary source of income for significant proportion of the poor.rnThe study also found that over a third (35%) of the households were insecure in their livelihood.rnMore proportion of households was insecure in economic dimension followed by housing, but arnfew was insecure in food dimension. The livelihood of households who were employed in privaternorganization (80%), casual labourer (62%) and beggars (60%) were more insecure than thernothers who engaged in other livelihood activities. Household size, monthly income, housingrncrowdedness, radio/television possession, livestock, credit and the interaction of municipality and population were found statistically significant determinants of poverty. In order to reduce poverty and improve livelihood security, the federal and regional governments should design small towns targeted poverty reduction programmes and trainings on skills of various kind and reengineering low price but high quality housing materials should be some of the top priorities in these towns. Furthermore, the local businessperson should involve in the establishment of agro-processing industries rather than migrating to the larger towns. This will help to improve employment opportunities in these towns.rnKey words: Small Towns, Poverty, Livelihoods, Assets and Livelihood Insecurity