Nagaland is basically an agricultural economy but over the year’s service sector has emerged as an important activity in generating income and providing employment. Service sector contributes the highest to State Gross Domestic Product and as per the Nagaland Economic Survey 2014-15, service sector contributed 59.75 percent to SGDP in 2012-13. This paper examines the growth and pattern of service sector and its contribution to employment and income generation using 233 respondents (enterprises) selected through random sampling from three towns of Nagaland viz. Dimapur, Kohima and Phek. Micro enterprises dominate the service sector in Nagaland with 68 percent of the total and within the service sector 70 percent are retail shops. The study also finds that there is positive impact of service sector in generating income and employment. While the Small and Medium enterprises contribute most in terms of employment, micro and small enterprises generate the highest income among the service sector.

KEY WORDS: Employment, income, service sector.