Through addressing the motivations behind rural households’ livelihood diversification, this paper examines the effect of the Sloping Land Conversion Program (SLCP) on livelihood diversification using a longitudinal household survey data set spanning the overall implementation of the SLCP. Our results show that the SLCP works as a valid external policy intervention to increase rural livelihood diversification. In addition, the findings demonstrate that the implementation of the SLCP has had heterogeneous effects on livelihood diversification across different rural income groups. The lower income group was more affected by the program in terms of income diversification.