In 2006, the government approved anational livestock policy based on the premise that thelivestock industry has an important role to play in buildinga strong national economy and in the process, reducinginequalities among Tanzanians by increasing their incomesand employment opportunities. This report presents ananalysis of rural livelihoods in Tanzania, with particularemphasis on the livestock sub-sector, smallholderfarmers' living standards, and issues with access toproductive assets. The report attempts to answer basicquestions such as: to what extent is keeping livestock anactivity of the relatively better off, and to what extentare poorer households able to engage?; how does the role oflivestock vary with different levels of income andwell-being?; how are livestock holding size and structureassociated with differences in welfare, gender, andgeography?; how important are input and output markets forsmall livestock keepers?; what form does this marketparticipation take in practice, and to what extent?; and towhat extent do the non-income services of livestock (forexample, manure, draught power) benefit crop production? Thestudy is based on data from the Tanzania national panelsurvey (NPS) collected by the national bureau of statistics(NBS) from October 2008 to October 2009 as part of the firstwave of a nationally representative living standards survey.Data was collected using household, agricultural, andcommunity questionnaires in which information was obtainedat the individual, household, plot, and community level Thereport is organized as follows: section one gives backgroundinformation; description of the data is presented in sectiontwo, in section three the authors analyze the composition ofrural income, household endowment of human capital, andaccess to infrastructure and assets, in order to gain anunderstanding of the level of wellbeing in the rural space.A descriptive analysis of the characteristics of small rurallivestock owners and their production practices is providedin section four, which highlights the heterogeneity of thehouseholds engaged in the livestock sector and presentsevidence of the sector's importance to rurallivelihoods in terms of both income and consumption. Sectionfive concludes with a discussion of key results and theirimplications for policy and further analysis.