This study has analysed the dynamics of rural non-farm enterprises and their role in employment provision, equity enhancement and poverty alleviation in Pakistan. Multiple data sources have been used including cross-sectional and panel datasets. The results show that majority of the rural non-farm enterprises in Pakistan are micro-enterprises with only a limited share in manufacturing. They are informal and have poor forward and backward linkages and high closure rate. Despite the poor asset base, they are providing jobs to more than half of the rural population, contributing to reduction in poverty and equity enhancement among the rural masses. Rich households own enterprises and poor households gain employment from non-farm enterprises. Non-farm economy has a significant impact in reducing multiple deprivations and also has a significant positive impact in pulling households out of poverty with the passage of time. Pakistan, being a country where most of the population is still residing in rural areas and where rural land is not equitably distributed; such non-farm activities are highly important not only to tackle the ongoing food security challenges but also for resource diversification of households.