Abstract: This study analysis the impact of smallholder farmers’ agricultural commercialization on rural poverty in Jimma zone south western Ethiopia. Both primary and secondary data were used to generate the required information. Multi-stage random sampling technique was used to select 280 smallholder farmers. Analytical tools used include descriptive statistics, Crop Output Market Participation (COMP), Foster Greer Thorbecke (FGT) and logit model. The results showed that about 43% of the small holder farmers were poor households. Smallholder farmer commercialization has no effect on poverty level of smallholder farmers. The estimation results of the logit model showed that sex, age and education level of household head, family size in AE, farm income, access to credit previous year and distance from settlement center to nearest market place were significantly affect rural household poverty. The study suggests for policies that will improve smallholder farmer access to education, credits, market information and road in designing poverty reduction in the study areas.