In India, while contribution of agriculture to GDP has been declining, agriculture still remains mainstay of the rural economy by employing almost half of the population. However, the gap between job seekers in rural areas and employment opportunities in agriculture has been widening and non-farm sector has become an increasingly important source of livelihood. This paper analyses rural diversification across States in rural India, factors responsible for non-agricultural employment, and identifies industries within rural non farm sector which are generating employment opportunities. Further, paper also looks into role of agriculture in rural diversification. This study is based on Employment and Unemployment Survey (National Sample Survey Organization) for the years 1999-2000 and 2011-12, and All India Debt and Investment Survey (National sample Survey Organization) for the years 2002-03 and 2012-13. The broad story that emerged from this analysis is that of a significant shift towards non-farm employment in rural areas, and this shift happened predominantly among economically weaker sections of the rural society. Access to land was an important determinant in this process of rural employment diversification.