The study has analyzed the factors that determine dairy farmers’ choice of marketing channel and to what degree their market choice influence the level of commercialization or market participation in Uttarakhand. The study has used multinomial logit model to ascertain major factors influencing producers’ choice of marketing channels, Chow’s seminal test to examine differences between data from diverse regions (plains and hills) and a multivariate regression model to assess the level of market participation. The study has revealed that given the right institutional incentives and market infrastructure, marginal and small landholders are capable of scaling-up milk production and hence commercialize their dairy enterprises. The results of multinomial logit analysis have indicated that increase in the scale of milk production would lead a shift away from cooperatives to market as point of first sale. Milk production and extension contact have emerged as the two most important policy variables favourably influencing intensity of market participation. Distance to market has negatively influenced likelihood of producers’ market participation, irrespective of hills or plains. Once the households decide to sell, this variable has been found not to significantly impact their level of participation in the plains. However, distance to market has been observed to negatively impact intensity of market participation in the hills.