Heavy state intervention over rural lands, lack of established legal and institutional framework tornaccess, use and transfer land has ca u se d land tenure insecurity in Ethiopia. At the same time,rnpopulation pressure, periodic land redistribution and inheritance practices led to subdivision ofrnholdings as the number of young landless farmers grew up with no alternative off-farmrnemployment opportunity. Despite the prevalence of the problem, there have not been rigorousrnempirical investigations that explicitly address the issue of tenure insecurity and landrnfragmentation in relation to agricultural productivity in Ethiopia.rnrnThis study is undertaken to investigate whether the existing land tenure system in Ethiopiarnaffects farm productivity and resource management practices . Specifically, it tests the generalrnhypothesis that tenure insecurity and fragmentation of holdings undermine productivity andrndiscourage land improvements. Based on a household survey data from Arsi, the study hasrnsupported the proposition that land tenure insecurity and fragmentation have significant effectrnon productivity and land improving investments.rnrnThough the study does n ot provide evidence to support t he direct impact of tenure insecurity onrnInput application , the results implied that the disincentive effects of tenure insecurity on landrnimprovements could contribute t o lower productivity of land in the long-term. Fragmentation ofrnholdings, on the other hand, is found to undermine productivity directly by affecting thernmanagement of farming operations as well as through its negative effect on input u se. The studyrnalso found that land fragmentation discourages farmers' incentive to manure their fields.