<p>This study investigates conflict-induced multidimensional poverty in rural and urban areas of East Wollega Zone, employing the Sustainable Livelihoods Framework (SLF) and Amartya Sen’s capability approach alongside the Multidimensional Poverty Index (MPI). Using a mixed-methods design and data from 341 households—both displaced and non-displaced—a binary logit model was applied to estimate the determinants of multidimensional poverty. The findings reveal that 87% of rural households and 55% of urban households are multidimensionally poor, with the difference being statistically significant (<i>p</i> &lt; 0.001). Displacement due to internal conflict significantly intensifies poverty, as 96% of displaced households face multidimensional poverty, compared to only 45% of non-displaced households [χ²(1, N = 341) = 45.8612, <i>p</i> &lt; 0.001]. In rural settings, poverty is primarily driven by deprivations in human and physical capital, while in urban areas, financial capital shortages are most prevalent. Nevertheless, physical and financial capital emerge as the strongest predictors of poverty across both contexts. Additional determinants include residence location, gender of the household head, literacy level, family size, dependency ratio, age, and occupation type. These findings highlight how conflict amplifies existing socioeconomic inequalities and multidimensional poverty burdens. The study underscores the urgency for integrated, evidence-based, and conflict-sensitive poverty reduction strategies. It advocates for inclusive development approaches that consider spatial and gender disparities, and emphasizes the need for policies that build household resilience through improved access to human, physical, and financial resources. Community engagement and targeted interventions are essential for promoting sustainable development and reducing vulnerability in East Wollega Zone.</p>