Livestock production is a major consumer of fresh water, and the influence of livestock production on global fresh water resources is increasing because of the growing demand for livestock products. Increasing water use efficiency of livestock production, therefore, can contribute to the overall water use efficiency of agriculture. Previous studies have reported significant variation in livestock water productivity (LWP) within and among farming systems. Underlying causes of this variation in LWP require further investigation. The objective of this paper was to identify the factors that explain the variation in LWP within and among farming systems in Ethiopia. We quantified LWP for various farms in mixed-crop livestock systems and explored the effect of household demographic characteristics and farm assets on LWP using ANOVA and multilevel mixed-effect linear regression. We focused on water used to cultivate feeds on privately owned agricultural lands. There was a difference in LWP among farming systems and wealth categories. Better-off households followed by medium households had the highest LWP, whereas poor households had the lowest LWP. The variation in LWP among wealth categories could be explained by the differences in the ownership of livestock and availability of family labor. Regression results showed that the age of the household head, the size of the livestock holding and availability of family labor affected LWP positively. The results suggest that water use efficiency could be improved by alleviating resource constraints such as access to farm labor and livestock assets, oxen in particular.