With the increasing rate of urbanization and industrialization, the current method of municipalrnsolid waste (MSW) management cannot be effective and efficient to handle thousand tons ofrnwaste generated daily in big cities like Addis Ababa. The objectives of the present study wererntherefore, to (i) demonstrate the positive environmental effect of municipal solid wasterncomposting and the negative impact of nitrogen (N) fertilizer (ii) compare the environmentalrnperformance of municipal solid waste compost and nitrogen fertilizer (iii) compare economicrnbenefit of MSW compost and N- fertilizer from agricultural and environmental point of views. Arnseries of experiments such as scenario analysis, incubation, leachate and effects of municipalrnsolid waste compost on yield and yield components of wheat were conducted to achieve the statedrnobjectives. The scenario analysis compared either disposing MSW in landfill or compositing forrnsoil amendment to improve crop production. The results of the scenario analysis revealed thatrncomposting resulted in greenhouse gas reduction due to avoidance of methane emission fromrnlandfill. The addition of MSW compost significantly increased the soil total nitrogen (Nt),rnorganic C, available P, pH and other microelements. Similarly, the leachate experiment revealedrnthat the application of both MSW compost and N-fertilizer produced higher concentrations ofrnNO3-N fluxes in the collected leachate that clearly showed fertilization during establishmentrnposes serious threat to water quality in the absence of growing plants. Moreover, the applicationrnof both MSW compost and N-fertilizer had positively responded in improving wheat yield andrnyield component. The partial budget analysis with minimum acceptable rate of return 100%rnrevealed that the highest net benefit (7038.35 Eth. Birr) was recorded with combined applicationrnof (20-kg N+3.33-t com) ha-1, however; the highest marginal rate of return (1024%) wasrnregistered for sole application of 5-t compost ha-1. The results of the present study revealed thatrnusing MSW as soil amendment along with appropriate composting techniques and soilrnmanagement not only improve soil fertility and reduce investment on chemical fertilizers but alsorncan alleviate the contribution of MSW to environmental pollution.rnKey words: MSW compost, incubation, leachate, economic analysis and urea