Potato is highly productive crop and can provide a cheap and nutritionally-rich staple food. Its potential as a cash generator and source of food is much under-utilized in many emerging economies. In this paper we study the impact of an intervention that introduced improved potato technologies in Chencha, Ethiopia on the livelihoods of smallholder farmers. We collected information through in-depth interviews in order to explore possible pathways of impact on farmers’ livelihoods; and used this information as the basis for designing a household survey. The results show changes in agronomic practices and consumption; these changes were most pronounced among wealthy farmers who participated in the intervention. Farmers used the additional income from potato in different ways: wealthier farmers improved their houses and increased their livestock, whereas poor farmers mainly invested in furniture, cooking utensils, tools and in developing small businesses like selling and buying cereals, milk and weaving products in the local markets. Some wealthy farmers, who did not participate in the project, also derived some indirect benefits from the intervention. This underscores: i) interventions that promote uniform farming technologies in themselves are not always sufficient to improve the livelihoods of poor farmers, and ii) the need to broaden the scope of interventions so as to take into account the resources available to farmers in different wealth categories, and the diversity of strategies that they employ for improving their livelihoods. Our approach allows to understand and describe the different developmental effects of a single technological intervention on the different aspects of farmers’ livelihoods.