The paper has examined the importance of rural non-farm and farm sector in meeting the consumption expenditure and the nutritional security of the small and marginal farmers. The study has analyzed the factors affecting the income of the diversification. The role of small farms is well recognized in the contribution towards total food grain production and poverty reduction. The study revealed that the contribution of marginal and small farmers to the total output is higher when compared to their share in the total land holdings. The contribution of small and marginal farmers to output ranges from 19 percent in Punjab to 86 per cent in West Bengal and it indicates the significant regional variations in their contribution to output. The farm level study conducted in Raichur district of Karnataka clearly indicates that income from the horizontal diversification is unable to meet the monthly expenditure of the household. The medium farmers and the income from crop enterprise are enough to meet the monthly household consumption expenditure. All the categories of the farmers were nutritionally better off and were consuming more than the recommended level with regard to milk, vegetables and fruits through diversified farming. Further, the availability of irrigation, farm mechanization, farm size and the experience of the farmers have been identified as the important factors influencing the diversified farming income. Thus, this study suggested that giving importance to both farm and non-farm sector will be the best option to double the income of the farmers particularly small and marginal farmers.