Ethiopia is one of the countries with rapid population growth, dense settlement inrnthe highland areas, inexorable environmental degradation, and insidious poverty.rnThe intensity of the problem is high in rural areas where the majority of thernpopulation lives and their livelihood directly or indirectly depend on the naturalrnresource. The current situation of the country shows that the rapidly growing ruralrnpopulation is exerting pressure on the environment to secure its livelihood. Thernshort-term decision of rural households on the environment to secure their means ofrnliving affects the sustainability of their livelihood in the long run. In the light of thisrnproblem, this study was conducted with an objective of analyzing the role ofrndemographic dynamics and changes in livelihood assets in sustaining livelihood.rnPrimary data obtained fiÂ·om 390 households randomly selected from three kebelernadministrations of Jimma Arjo District were used for the study. Both descriptivernstatistics and econometric model were used to analyze the data. The results ofrndescriptive statistics showed significant mean difference in dependency ratio, laborrnforce size, and livestock ownership. It was, however, insignificant for family sizernand land size. Households headed by females and younger persons were found tornhave limited access to livelihood assets. The households had limited access to creditrnservices and saving. Most households live at reasonably shorter distance from mainrnroad. Given the livelihood assets they have, farming is the main source of livelihoodrnand the contribution of diversification of activities to rural livelihood was limited.rnNon-farm income contributed only 8.8 % to their income. The multivariate analysisrnshowed decreasing probability of livelihood sustainability with increasing familyrnsize and dependency ratio. The livelihood of households headed by females,rnilliterates, persons of low decision making power in local organizations, andrnhouseholds with limited access to credit service was found to be less sustainablernthan their counterparts. At 5 % significance level, age group of household head,rnland size, labor force size, health status of households, saving, and participation inrneBOs were found to be insignificantly related to sustainable livelihood. Based onrnthe findings, the following points of recommendations are stated: increasingrnawareness of people about the disadvantages of large family size, improvingrnhouseholds' access to livelihood assets, affirmative action for disadvantagedrngroups, and strengthening of rural local institutions.rnKey Words: Demographic Dynamics, Livelihood Assets, SustainablernLivelihoods