This study examined the relationship between oil exploration activities and community livelihoods in Hoima District, Uganda, a focal area of the country's emerging oil industry. Oil exploration brings both opportunities and risks to host communities, and understanding its net effect on livelihoods is essential to ensuring that resource development benefits, rather than harms, local people. The study investigated how employment and income opportunities, infrastructure development, land access and displacement, and environmental change relate to community livelihoods. A cross-sectional survey design with a mixed-methods approach was adopted, and data were collected from 190 respondents comprising community members, local leaders, and district officials using structured questionnaires and interviews. Descriptive statistics, exploratory factor analysis, Pearson correlation, and structural (path) analysis were used. Factor analysis confirmed the construct validity of the oil-impact dimensions, which loaded onto coherent factors and explained 68.1% of the variance. The results revealed a strong and significant overall relationship between oil exploration activities and community livelihoods (R² = 0.650), with a mixed pattern of effects: employment and income (β = 0.31) and infrastructure development (β = 0.29) improved livelihoods, while environmental change (β = −0.20) and land access and displacement (β = −0.18) undermined them. The study concludes that oil exploration has a double-edged effect on community livelihoods and recommends maximizing local employment and infrastructure benefits while mitigating environmental and land-related harms.