PhD ThesisLow crop productivity in Tanzania leads to developing ways of improving efficiency in production. Just like other crops, tobacco production efficiency in the country leaves a lot to be desired. Conversely, there is dearth of information on how limited resources in crops production are being used to optimize outputs. Thus, this study was conducted to assess resource use efficiency and subsequently to determine the underlying factors which affect inefficiencies in the production of tobacco, maize, paddy and beans by tobacco smallholder farmers focused on comparing profitability and efficiency across districts. Data were collected from twelve Cooperative Societies involving 395 farmers. Profitability was quantified using enterprise budgeting technique and the GM differences were analysed using Analysis of Variance (ANOVA). The DEA approach was used to estimate efficiency scores while a two-limit Tobit model was used to identify factors which explain inefficiency variation. Finally, a five point Likert scale was used to identify challenges facing smallholder farmers. Results show that tobacco production is profitable with an average gross margin of TZS 1 610 582.72 per hectare. Further, the results show that there were significant differences (p<0.05) in gross margin across districts. The overall mean levels of technical, allocative and economic efficiency have been estimated at 68%, 42% and 28% respectively. Accordingly, there are statistically significant differences across districts (p<0.05). Technical inefficiency in crop production was negatively and significantly (p<0.05) influenced by age of household and farm size and positively and significantly (p<0.05) influenced by distance to the field and access to extension services. Further, economic inefficiency was negatively and significantly influenced by farm size, access to credit and frequently visits by extension officers positively and significantly (p<0.05) influenced by access to extension services. Besides, low price of outputs, complicated grading system, side selling, access to credit and high costs of inputs were found to be critical challenges faced by tobacco smallholder farmers. As such improvement in production efficiency would amongst others, require improved access to credit, reduction of tax on imported inputs, investment in extension services and programmes focusing on increased access to markets and credit sources are suggested as policy options.