Tourism has emerged as a critical driver of socio-economic transformation in peripheral and ecologically fragile regions across the developing world. The Kutch region of Gujarat represents a compelling example of how tourism-led development can simultaneously diversify livelihood sources and improve socio-economic well-being. This paper examines tourism as a dual catalyst that not only expands income opportunities but also enhances livelihood quality through improved income levels, employment generation, infrastructure development, and social empowerment. Drawing on primary survey data and secondary sources including government reports and academic literature, the study finds that approximately 77 percent of respondents perceive tourism as enabling multiple income streams, primarily in a supplementary capacity. At the same time, tourism has led to measurable improvements in income, reduced out-migration, enhanced market access, and strengthened local entrepreneurship. The analysis integrates the case of Hodka village to illustrate how community-based tourism models can amplify both diversification and improvement outcomes. However, structural challenges such as seasonality, environmental pressures, and uneven distribution of benefits limit the transformative potential of tourism. The paper argues that tourism in Kutch operates as a complementary yet transformative sector that enhances resilience and improves livelihoods when embedded within inclusive and sustainable policy frameworks.