This study explains change in livelihood strategies and perception of the people to land degradation and land scarcity in two villages of highland of Ethiopia. It focuses on how the livelihood strategies of the rural households have changed with the increasing of land degradation and scarcity over the past fourteen years. The finding shows that the households of two villages adjust and change their livelihood strategies overtime to cope with the problem they faced. These strategies, however, vary depending on the extent and types of the problem, accessible resource and potential opportunity they incur. Moreover, it is shaped and reshaped historically based on social and political circumstances adopted over time. Finally, the finding also indicates that the livelihood strategies of a given community determines the participation of peasants in natural resource management as some livelihood strategies result in the depletion of the labor forces required to undertake natural resource conservation practices. Hence, the author recommends that the livelihood of a given community should be considered for successful planning and implementation of natural resource conservation practices.