Goats are renowned for their resilience in harsh environments and their relatively low investment for maintenance. Goat husbandry is thought to be a tool for poverty alleviation. Empirical evidence of this is scant. This research analysed the role of goat husbandry in supporting the livelihoods of smallholders from the Bajío region in Michoacán, Mexico. The Bajío is renowned for the good cropping potential of the land; smallholder goat husbandry is present too but largely unstudied by scholars and ignored by policy makers. The smallholders in the study area deploy a range of assets, natural, physical, social, human and financial, in goat husbandry. Their goat husbandry is dairy-oriented; it is a source of weekly income and insurance and therefore an alternative to out-migration. Farmers’ relatively high social capital allows them to access cheap crop residues and take turns herding flocks. The goat dairy market is controlled by a powerful caramel industry. In turn, the margins smallholders obtain are rather limited. The nutritional value of goat milk is not exploited in their households as it is seen as a ‘fever’ cause, related to brucellosis. Qualitative and quantitative methodologies are based on the sustainable livelihoods approach linked to actor-oriented approaches. The study revealed smallholders’ agency by engaging in goat husbandry to deal with a complex institutional and political context dominated by economic liberalization intertwined with local realities such as the agroecology. We emphasize the importance of these findings in development strategies for small-scale goat husbandry systems.