Livelihoods in rural southern Laos are highly diverse, comprising a wide range of different productive activities. In this paper motivations for diversification within livelihood strategies in rural communities in southern Laos are investigated through theories of distress-induced risk spreading in response to crises and progressive success and wealth. Results indicate that livelihood diversification at the household level is associated with higher wealth status and ownership of a range of assets as part of a progressive, accumulation livelihood strategy for those with fewer constraints. Diversification strategies across all socioeconomic groups commonly include a combination of agricultural and non-agricultural activities as well as migrant remittances, however, the types of activities undertaken are dependent on wealth. The increased asset status of households extends to enabling higher income-generating migration opportunities and may facilitate transition into both non-agricultural employment, as well as into a wider variety of agricultural employment activities. This further strengthens livelihoods through the mutually reinforcing complementarities across livelihood activities and reducing the risks associated with each. But this has the effect of leaving the poor, with lower levels of diversification, at most risk to natural or economic disasters or other shocks. Results have implications for development policy for rural southern Laos, highlighting the importance of recognizing the positive aspects of livelihood diversification for rural poverty reduction. Broadened policy mechanisms which support and encourage diversification and mobility at the household level are needed. Likewise, pro-poor development initiatives that focus on increasing the diversity of assets (rather than the quantity of any one single asset) of the poor are more likely to be successful in supporting livelihood diversification and reducing vulnerability.