The study was conducted to analyze sheep value chain in central and eastern Ethiopia. The objectives were to identify core functions, major market routes and to assess distribution of costs and margins. Purposive and simple random sampling was employed as a sampling technique to select 150 (75 mixed crop-livestock producers and 75 agro-pastoralists) respondents. The data collected through structured questionnaire and analyzed by using statistical package for social sciences (SPSS) Software. Core value chain functions were used to show both qualitative and quantitative data collected during the field study period. Agro-pastoralists on the other hand supplement wheat bran and corn. 84% and 70% of the interviewed households in mixed-crop livestock and ago-pastoralists have access to veterinary services, respectively. Majority of the respondents in mixed crop livestock (85.6%) and agro-pastorals (67.9%) got veterinary services within 4km distance. About 69.3% of mixed crop-livestock farmers and 84% of the agro-pastoralists had no access to credit service. Sheep fattening is not commercial oriented. The analysis of costs and margins along the different sheep market channels shows that the proportion of final sheep price that reaches producers from hotels and export abattoirs were 75% and 72%, respectively. The value chain is constrained by low genetic potential, shortage of feed in quality and quantity, disease, lack of technology, simultaneous operation of both legal and illegal livestock marketing, lack of market information and lack of integration among value chain actors. It is recommended that the linkage between sheep producers and other chain actors should be strengthened.

Keywords: Market route, Value chain, Production system, Sheep.