Ethiopia is the homelands of various spice types. Red pepper is one of the most important spice types that produced by many smallholder farmers both for consumption and marketing purpose in northwestern Ethiopia. However, profitability of spice in general and red pepper, in particular, is not well understood in the study area. Therefore, this research attempted to examine profitability and determinant's profitability of red pepper production in Northwestern Ethiopia. Primary data were collected through a semi-structured interview's schedule administered on 385 red pepper producers’ selected using systematic random sampling technique. Moreover, the survey was supplemented by using secondary data, focus group discussions and key informant interviews. Combinations of data analysis methods such as the descriptive and inferential statistical model were used for analyzing the data. The result of descriptive statistics indicated that, a majority of red pepper producers (80%) obtained a profit below the average levels of profit. Likewise, the net benefit obtained by red pepper producers was 2,255.58 ETB/Qt and 21,931 ETB/year. The results of multiple linear regression models revealed that out of twelve explanatory variables included in the model, variables such as farming experience(p<0.05), volume of output produced(p<0.01),numbers of labour used (p<0.1), fertility status of land(p<0.05) and amount of variable cost incurred(p<0.05) had a significant effect on profitability of red pepper. Generally, production and marketing of red pepper are profitable enterprise and play a significant role in improving livelihoods of most households. Thus, policy should be designed on integrated marketing and farming system to minimize profit risk in red pepper production and to improve the livelihood of most producers

Keywords: Profitability; Cost; Red Pepper; Linear Regression model; Spice; Ethiopia