Farming systems in Tibet are undergoing significant change as farm households are encouraged to shift from more subsistence-oriented staple cereals to more intensive, diverse, and integrated forage crop livestock systems reliant on engagement with external input and product markets. This is occurring at a time of rapid agrarian transition with more and more of the livelihoods, income, and expenditures of farm households dependent on off-farm sources. Modernizing an agricultural sector that can sustain the livelihoods of smallholder farmers and meet the demands of an ever more discerning customer base all within the confines of a limited resource base has proved a major R&D and policy challenge for Tibetan and Chinese officials, let alone the farmers and market actors impacted by these developments. In this paper, key drivers impacting diversity in Tibetan farm households, including agrarian transition and demographic, infrastructure, and food price developments, are outlined. The impact on household economics and on the environment of the more intensive and diverse farming systems are then discussed, along with the attitudes of farm households to the changing farming systems and to their future in farming. The paper finds significant labor and environmental challenges that farm households and policy makers must grapple with if the farming system and agrarian transition trajectories are to be sustained.