A Dissertation Submitted in Partial Fulfillment of the Requirements for Award of the Degree of Master of Science in Development policy (Msc. DP) of Mzumbe University.In the mid-1980s, Tanzania adopted a programme for economic liberalization of the entire economy after pressure from the IMF and the World Bank. It was promised that this economic liberalization would provide a strong stimulus to Tanzanian agriculture. In 1986, Tanzania had to sign with the World Bank and IMF the Structural Adjustment Programme (SAP), where agricultural subsidies were perceived to cause economic inefficiencies, and were completely removed in 1994/95. However, available data show that, this promise was not been fulfilled. In 2006, Tanzania came back and inaugurated the strategies for the transformation of Tanzania’s agriculture under the theme “KILIMO KWANZA”. The major aim is to combat poverty and food security through enhanced agricultural productivity via subsidized agricultural inputs. Despite seven years since its inception, little is known about achievement of programme’s objectives. In this regard, this study examined the impact of subsidized fertilizer on maize production and household income. The study used survey research designs and data were collected using questionnaire and interviews. The study employed both qualitative and quantitative approaches. The findings indicate that post subsidy programme period had an average of 77758 tons compared to 58453 tons of the pre fertilizer subsidy period. Furthermore, findings indicated that there were differences in production between the users of fertilizer and non-users of fertilizer for the year 2012. Lastly, as the logic of subsidy suggests, using year 2012 as a case, it was found that the income for three groups was significantly different suggesting that users of subsidized fertilizers are likely to earn more income than the other two groups of farmers due to low cost of inputs. Some policy recommendations are given to promote the agricultural sector as one part of the national strategies in reducing income and food poverty. The budget constraints in the agricultural sector can be enhanced through reducing public expenditure on non-productive luxurious goods such as vehicles for bureaucrats and instead such budget should be allocated to agricultural sector which can lead to multiplier effect.