Abstract: This study aims to assess levels of on-farm diversification in Vietnam. The results reflect regional differences in terms of on-farm diversification and its determinants. Households in northern regions have adapted to the fragmented and small-sized parcels of land by diversifying their on-farm activities. In contrast, the Mekong Delta region in the south of Vietnam is characterized by larger agricultural parcels and a specialization in rice production. Land use fragmentation, as reflected by a large number of plots in a given area, is one of the most important reasons for the high levels of on-farm diversification, while the higher share of non-farm income in total income is the reason of lower levels of on-farm diversification. Households have reacted to natural and economic shocks by diversifying their on-farm activities. The non-stationary Markov chain model used here shows various diversification scenarios and trends. In most cases, the on-farm diversification is expected to reduce in coming years.