The study investigated the household forest resource extraction and income diversification of farm woodlot land-use system in Ganderbal district of Kashmir. The study administered multi-stage random sampling technique to withdraw the sample of 163 woodlot owners from the 12 sample villages. Secondary data were collected from all the possible sources and primary data were collected through structured interviews, non-participant observations, woodlot inventories and rapid market assessment. The data were analysed using descriptive statistics including frequency, mean, percentage, range and standard deviation. The study documented four types of woodlots commonly established by the smallholder farmers and the growing stock of farm woodlots recorded were; Poplar (17.59 m3), Salix (21.30 m3), Robinia (20.92 m3) and Mixed (18.23 m3). The woodlot resources generated annual income of ₹71391.81/household (subsistence= 68.81%, cash= 31.19%); of which timber contributed the maximum share (56.99%) followed by fuel wood (16.26%), wicker (14.15%) and charcoal (12.60%). The average gross annual income was ₹138756.78/household which is differentiated as agriculture (20.12%), business (18.02%), woodlots (16.05%), livestock (13.24%), horticulture (10.26%), service (6.94%) and wage labour (4.03%). Nonetheless, the farm woodlot resources are the 3rd major contributor of household economy. Woodlot farming play a significant role in livelihood security by the production of forest resources for subsistence consumption, cash income, safety-nets and employments. The study confirmed that the farm woodlots are the key option for socioeconomic development, poverty reduction and livelihood security; hence, policy must be directed towards the income diversification through sustainable production, extraction and commercialization of the woodlot resources.