Farmers in Nepal mid-hills have practiced agroforestry for generations as main source or supplement of timber, firewood and fodder from government forests. The nature and extent of agroforestry practice is being challenged by rapid social and economic change particularly in the recent rise of labour out-migration and remittance income. Understanding is required of the critical factors that influence farmers in the way they adapt agroforestry to their circumstances. This paper analyses the relationship of households’ livelihood resources and agroforestry practice to identify trajectories of agroforestry adaptation to improve livelihood outcomes. Using data from a survey of 668 households, it was found that landholding, livestock holding and geographic location of farmers are key drivers for agroforestry adaptation. A multinomial logistic regression model showed that in addition to these variables, household income, household-remittance situation (whether the household is receiving remittance or not) and caste influence adaptation of agroforestry practice. The analysis indicates that resource-poor households are more likely to adapt to terraced-based agroforestry while resource-rich households adapt to woodlot agroforestry.