In Ethiopia, where a large proportion of rural households depend on livestock for livelihood, food security remains a significant concern for large portions of the population. The commercialization of the livestock sector is expected to play an important role in stimulating economic growth, reducing poverty and achieving food security. This study evaluates the effect of livestock market participation on household’s food security and welfare using a nationally representative cross-sectional survey data of rural households in Ethiopia. The endogenous switching regression model which accounts for both the selection and endogeneity bias is employed to examine the effect of livestock market participation. The robustness of the results is checked using propensity score matching. The results indicate that participation in livestock market improved food security and welfare of the participating households. Participation in the market also would have increase food security and welfare of non-participants had they decided to participate in the market. Furthermore, in rural areas where alternative income possibilities are scant, livestock market participation has smoothed food consumption by providing income in times of harvest failure or other shocks striking households. However, building a more sustainable market-oriented production system is critical for the improvement of household food security and welfare.