<p>Loktak Lake (287 km²) is a Ramsar wetland located in the northeast Indian state, Manipur. The ecology of the wetland has deteriorated, which jeopardises the livelihoods of fishers and farmers. The study assesses livelihood risks in fishing and farming posed by ecological changes, investigates the level of livelihood diversification, and predicts its determinants. It is based on the field survey of 600 households from 12 census villages in the wetland. Participatory risk mapping (PRM) is employed to assess subjective risks in livelihood, and the Simpson Diversity Index (SDI) examines the extent of livelihood diversification. Finally, an ordinal logistic regression (OLR) model is designed to identify the determinants of livelihood diversification. PRM portrays that <i>phumdi</i> proliferation, water pollution, and decline in fish species and production are the predominant causes of concern in fishing. In farming, vagaries of monsoon, and submergence or flooding of agro-land are severe perceived risks. SDI estimates that around 27% households have no livelihood diversification, which implies that they were only engaged in wetland-based fishing or farming. Around 50% households have a medium-level diversification, i.e., engagement in 2–3 non-farm activities with equal income contribution, alongside a principal activity. Diversification is mainly contributed by creative manufacturing and handmade activities, construction works, and sales occupations. The OLR model investigates the predictors, such as household size, migration status, landholding, livestock possession, and livelihood risk perception, significantly explaining livelihood diversification. The study draws the attention of policymakers to ecological conservation and restoration, keeping sustainable wetland livelihood in view in the region.</p>