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This research was about the effect of Farm-gate prices on the livelihood of peasants in Nankoma Sub County located in Bugiri District in Uganda. The study was based on three specific objectives: to identify factors which determine farm-gate prices, to determine the effect of farm-gate prices on the livelihoods of peasants and to evaluate the effectiveness of measures designed to stabilize farm-gate prices. The findings reveal that five major factors determine farm-gate prices: government role in providing seed varieties, packaging materials, storage facilities, means of transport, and technology used. The findings revealed that farm-gate prices have a positive and significant effect on the livelihoods of peasants (R2 = .863; CI = 90%; P=0.00). The effectiveness of government attempts to stabilize farm gate prices was explained by availing market extension services, providing storage for agricultural products, encouraging farmers to maintain the hygiene of crops, helping to verifymeasurements, especially by verifying the effectiveness of measuring scales,and helping to advocate for processing of products instead of selling unprocessed products.