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This chapter asks whether there will be positive or negative impacts on smallholder farmers and rural households as more agricultural land is used for biofuels production. The study uses a computable general equilibrium model to assess the distributive effects and food security implications of biofuels production in Ethiopia. We model the production of jatropha, castor bean, palm oil, and sugarcane as biofuel feedstock crops, with and without the effect of technology spillovers into food cereal crops. We find that the technology spillover effects of certain feedstock crops can increase the production of food cereals (with the effect varying across agro-ecological zones) without increasing cereal prices. In particular, when we model the production of sugarcane as a feedstock, and when we model jatropha and castor bean scenarios with spillover effects, production activities are projected to increase overall agriculture production and food security. When spillover effects are considered, biofuel investment tends to improve the welfare of most rural poor households. Urban households benefit from returns to labor under some scenarios. Thus, for both rural and urban households, biofuels expansion can improve household welfare under some scenarios. These findings assume that continued government investment in roads allows biofuels production to expand on land that is currently unutilized, so that smallholders do not lose land.