This study develops and estimates the Rural Livelihood Index of rural communities of Pakistan and investigate the factors affecting the livelihood. The DFID defined livelihood in terms of five major components i.e. human, social, natural, physical and financial capital. Each capital is composed of different number of sub-components. The secondary data of each sub-component is retrieved from the IFPRI. The rural districts of three provinces of Pakistan i.e. Punjab, KPK and Sindh are included in the study. The major components are estimated from indicators, which are used in the estimation of rural livelihood index. The mean values of all five components across each districts have been estimated and compared across provinces and across districts within the province. Our empirical findings show that in Punjab, district Bhakkar performs well in terms of rural livelihood followed by Kasur and Bahawal Nagar. In Sindh, Jaccobabad and Dadu districts have greater rural livelihood index followed by Sanghar and Hyderabad. In KPK, the rural people living in district Mansehra are enjoying better living standards as compared to district Nowshera. Across provinces, Punjab has maximum rural livelihood index followed by KPK while Sindh has lower value of livelihood index. The livelihood can be improved by increasing the educational status of rural communities and it can be done by increasing the number of schools at mouza level. The number of healthcare centers and their quality services can play a significant role in improving health status of rural areas. There is a need to establish a connectivity between rural areas and adjacent cities to develop a growing environment for SMEs. The latest farm equipment significantly affects the farm productivity and farm income. The livestock plays an important role in improving livelihood. Supervisor:-Dr. Abedullah