A smallholder dairy cattle farming has been practiced by farmers in Tanzania, particularly in rural areas as a means of livelihood through income generated and food security although information about its impacts might not be clear from different locations. This study examined socio-economic impacts of smallholder dairy cattle farming on the livelihood in Sunga ward of Lushoto District, Tanzania. A cross-sectional study design was adopted whereby quantitative approach was used. Simple random sampling was used to select 120 households from 384 total households practicing dairy cattle farming. The survey was used as the method of data collection. Structured questionnaire constructed from close and open ended questions was utilized as an instrument of data collection. Data analysis was done by using SPSS whereby the study revealed descriptive statistics and paired-samples t test. Results show that smallholder dairy cattle farming has a social impact on household food security due to increased crop yields (97.5%), milk consumption (74.8%) and selling of cattle (67.2%). Also, households improved access to education (79.2%), improved access to health services (84%) and increased assets (87.4%) such as buying of land, motorcycles and construction of houses. Moreover, dairy cattle farming has demonstrated economic impacts through direct income generated from selling milk (65.8%), using manure for agriculture (100%), income from selling cattle (71.7%) and perceived as a source of employment (92.5%). Income from selling milk contributes about 47% of annual income of the household. Through cattle manure application on cropping farms, average household annual income in Tanzania shillings (TZS) generated from crops was significantly increased to TZS 555300 from TZS 166600 in the period before household introduced cattle manure (t=10.188, p<0.001). This study recommends the government to allocate more extension officers in rural areas, particularly in Sunga ward in order to enhance knowledge and skills of farmers that can help to improve further their efficiency in dairy cattle rearing so as to increase their income and enhance food security for sustainable livelihood.