Groundnut is an important component of the national food supply. It does not only have nutritional and dietary value, groundnut also provides cash to farmers; enrich the soil with nitrogen through biological nitrogen fixation; and its haulms can be used as fodder and fuel. Groundnut production has not kept up with the demands both local and export markets especially in terms of volumes over time. This has been in part due to low average yields resulting from continuous use of unimproved seed. In turn Malawi’s groundnut exports have also generally dwindled over time. The analysis of Malawian groundnut production using the Policy Analysis Matrix methodology shows that both traditional and improved technology groundnut production are both privately and socially profitable. This leads to the conclusion that protectionist policies that would raise domestic groundnut prices above the import parity prices determined in world markets are unnecessary. However, investments in improved technology show profits that are greater than traditional technology. These are likely to be areas in which government investments would yield a significant rate of return and reduce dependence on world markets. In addition to investments in improved seed technology, government should also invest in improved technologies for post harvest handling.