A Dissertation 2019Agriculture is an important sector in developing countries serving most people in rural areas as their main means of livelihood. About 84% of agriculture activities in Tanzania are done by smallholder farmers. Cotton is an important cash crop for many countries in the world. In Tanzania cotton is a major cash crop in the western cotton growing area, which includes Mwanza, Shinyanga, Mara, Simiyu, Geita, Tabora and Singida regions. The cotton subsector is known to involve expensive activities to be undertaken compared to other crops. Farmers in cotton farming areas are characterized by having limited access to inputs like fertilizer, pesticides and herbicides due to widespread poverty among them. For smallholder farmers to get profit from cotton production, efficiency in allocating their resources is crucial. The objective of this study was to assess whether cotton producers in Chato District get profit from cotton production and whether they produce at the minimum cost. A multistage sampling procedure was employed to select 150 respondents (134 males headed households and 16 female headed households) from Chato District. Descriptive statistics, net profit analysis and a Cobb Douglas stochastic frontier model were computed. The mean net profit realized was 454 422 TZS/ha. The minimum and maximum net farm income was -530 938 and 2 399 775 TZS/ha respectively. The results from quartiles range show that majority of famers are getting profit but the level of profit is different where others are getting lower profit or negative return. The return on investment was 0.86 shillings for every shilling invested. The study established that, all coefficients in the frontier model (quantity of cotton harvested, seed, pesticides, fertilizer, land rent and transport costs) have a positive sign indicating that as inputs, they have a positive influence on the total production cost. The results show further that, the mean cost efficiency of smallholder farmers in the study area was 2.9, the minimum cost efficiency observed being 1 and the maximum was 6.4. The inefficiency model revealed that, cost efficiency among farmers was positively influenced by farmers’ education level, access to extension services, family size and membership in cotton growing associations.