This study examines the socioeconomic characteristics that influence the decision to diversify and also the welfare effect of diversification on farm households in Makurdi, Benue State. A total of 120 farm households were sampled using a simple random technique. Structured questionnaires were used in collecting the data. The ordinary least square (OLS) model was used to analyze the welfare effect of diversification while the Logit model was used to analyze the determinants of diversification. The Logit results show that a male-headed household, education and credit increase the probability of diversification while farming experience and market access decrease the probability. The OLS result shows that diversification, age, education and credit have a positive and significant effect on household welfare while household size has a negative effect. These results have important implications for policy, economic growth and development