Pakistan is known to be a climate vulnerable country in the world. Being an agrarian country, floods poses higher threat to rural livelihood. The study assessed the underline causes of livelihood vulnerability in a flood prone rural area surrounded by riverine Jhok Reserve forest of Punjab Province. Using Livelihood Vulnerability Index (LVI), eight potential components were inquired from two hundred natural-resource dependent households. Two approaches of LVI were customized to incorporate indigenous knowledge into 42 sub-components. The findings of the study showed that local people had poor socio-economic conditions, which led to have a wide networking gap in the community. People have become highly vulnerable to climatic changes because of higher environmental degradation in form of riverbank erosion, deforestation, etc. It was revealed that community in Jhok Reserve Forest had low adaptive capacities mainly due to higher poverty, low education level and lack of awareness about future disasters. And this has exposed them being unable to adapt to environmental changes. The findings of the study are significant for the policy makers to analyze the root causes of livelihood vulnerability and formulate agricultural adaptations for other rural communities. Overall, it is suggested that a reliable vulnerability assessment approach is presented in the study which can be replicated in other settings and regions of the world.