Livestock husbandry is seriously affected by drought and other climatic extremes in Malawi. Farmers also use livestock as insurance against idiosyncratic and covariate shocks. This study analyzed the impact of drought on indigenous livestock production in rural Malawi and identified the extent to which livestock are used for shock impact mitigation. Data were collected from 300 randomly selected farmers and analysis was done with descriptive statistics and Tobit regression. Results show that farmers that were affected by climate change related shocks have significantly lower land, farm revenue and credit (p<0.10). About 38.67% of the farmers were affected by drought in the past 5 years. Number of goat and pigs owned by farmers that were affected by climate shocks were significantly lower (p<0.05) than those not affected. Goat and pig production significantly decreased with drought (p<0.01) while land owned significantly increased chicken and pig production (p<0.01). Selling of livestock was used by households to cope with drought, pests and diseases and sickness. However, reduction in meals constitutes the widely adopted means of coping against shocks. The study, among others, recommended marginal reforms that are targeted at inhabitants of drought prone rural areas in Malawi because of their present extreme vulnerability.