This paper uses two triple-hurdle models to analyse the determinants of Ethiopian rural households decisions in (1) milk production, butter marketing and volume of butter sales; and (2) milk production, purchased input use and intensity of purchased input use. Results are based on data collected from 5000 households and 497 rural communities in the highlands of Ethiopia. Availability of feed stands out as an important factor influencing household decision to engage in milk production, indicating the dire need to develop feed resources to promote dairy production in rural Ethiopia. Milk production in rural Ethiopia seems to have an interesting and complex gender dimension. While female-headed households are less likely to be engaged in milk production, perhaps because of resource limitations, they are more likely to manage their dairy farms intensively. Marketing costs matter in dairy production and marketing in rural Ethiopia, suggesting for the need to develop market infrastructures for both dairy outputs and inputs. Our results further show that participation in butter markets as sellers or the amount of butter sales do not respond to price signals, suggesting the need to understand the behavioural aspect of dairy marketing decision in rural Ethiopia. Acknowledgement :