Khat (Catha edulis Forsk), is a stimulant plant grown mainly in Ethiopia, Yemen and Kenya. Currently it is a ubiquitous commodity cultivated and chewed; imbedded in Ethiopian culture and agriculture. In a circumstance of land degradation and scarcity farmers consider Khat as a better small-scale faming alternative; however land disposition for Khat-mono-cropping can be a disadvantage. Adjusting for the sets of alternatives on the land area to be used for crop production and on-farm crop variety is a factor that determines Khat farmers’ household sustainable agriculture and livelihood. The dynamics in relation with rural households Khat production/consumption is not well explored. This study sets out to document the implication of farmers’ choice of khat production and / or consumption on land use for crop production and crop variety production in rural households of Ethiopia. A panel survey using quantitative method was adopted. Data were collected in two regions of Ethiopia using pre-tested interviewer-administered questionnaire using Open Data Kit (ODK). Data were exported to STATA version SE 12(Stata Corp LP, College Station, Texas, USA). Multivariable linear regression model was run. A significantly higher proportion of khat consumers were producers (P<0.001). Land size used for crop production increased by 0.2 units (hectares) for khat consumers and producers as compared with No-Khat consumers and no-khat producers’ households (β=0.20, p<0.001). The likely hood of having variety of crops is two times higher for Khat consumer and Khat producer households as compared with no-Khat consumers and no-Khat producers households (AOR: 2.00 [95%CI: 1.38, 2.91], p<0.001). Land tenure system and agricultural policy and interventions should consider this Khat cropping effect among households in Khat producing areas of the country. Khat cultivation and use should be understood in a proper context in association with economical; social, cultural and environmental reality.