Studies on the efficiency of peasant farms are very important sources of policy advise inrnagriculture dominated economies such as that of Ethiopia. The importance extends to therneconomy at large beyond directly affecting peasants. An important factor that is central tornthese studies is land use arrangements' role in determining efficiency levels. Volumes ofrntheoretical controversies and empirical evidences are documented in the literature on thernimpact of land use arrangements on efficiency of farmers. This study tried to investigate andrnanalyze technical efficiency of farmers and its difference between groups of householdsrnworking under different mode of land use arrangements. It also attempted to indicate somernof the factors that might affect the efficiency of tenant farmers. To this effect, Cobb-Douglasrnstochastic frontier production function and other econometric tools are employed on arncross-sectional data of 340 households operating with similar farming practices. The meanrntechnical efficiency of sample households is found to be around 62.8 percent indicating thernexistence of inefficiency and considerable potential for efficiency improvement under therngiven state of technology. Efficiency is found to be higher for smaller farms and householdsrnwith literate household heads. Wealth of the household, level of credit, amount of fertilizerrnused and rainfall are found to contribute significantly to production. Regardless ofrndifferences ill the mode of landholding and tenancy associated problems, no significantrnefficiency gap is observed between owner-operators and tenants. On the other hand, in linernwith the hypothesis of the Marshallian and others, there is an indication that non-sharecroppersrnperform better than sharecroppers are. The way inputs are financed andrndecisions are made on activities has some influence on efficiency of tenants. To enhancernefficiency of farmers, efforts towards providing training and extension services, forming andrnexpanding the coverage of credit and small-scale irrigation schemes should be strengthened.rnIndeed, given the land use policy which provides room for land renting, the formation andrnfunctioning of land rent-lease arrangements among farmers would enable better use ofrnresources and enhance the overall efficiency of the sector.