Livelihood vulnerability inquiries in their current form prove insufficient in accounting for the dynamic aspects of livelihoods. In consideration of the generally adopted “Scenic spots + communities + smallholder” tourism development model in rural revitalization in China, a Tourism Livelihood Vulnerability Index (TLVI) was developed to estimate the vulnerability of tourism smallholders in the upper reaches of Yihe River, China. Data was collected from 524 smallholders and 7 tourism villages. The statistical results showed that the livelihood strategies of smallholders in tourism destination communities can be divided into four categories: Tourism – oriented (TO), Tourism and part-time migrant work (TPM), Migrant work and part – time tourism (MPT), and Migrant work – oriented (MO). The TLVI showed significant disparities among four livelihood groups, with MPT smallholders emerging as the most vulnerable, sensitive, and least adaptive. In contrast, TO smallholders displayed the least sensitivity, exposure, TLVI, and the highest adaptive capacity. The result suggested that low diversity degree livelihoods are less vulnerable than high diversity degree livelihoods in rural transformation. The contributing factors of the household livelihood vulnerability were highly community – household livelihood strategy specific. Four recommendations were at household and community level to enhance livelihood resilience and reduce vulnerability. The TLVI contributes to a better understanding of the livelihood vulnerability characteristic of household tourism operation systems in the context of tourism-guided rural transformation.