Yield enhancement through increasing efficiency in cereal production in general and in wheat production in particular could be an important way towards achieving food security. This study was aimed at estimating the levels of technical, allocative and economic efficiencies of smallholder wheat producers; and to identify factors affecting efficiency of smallholder farmers in wheat production. A two stages sampling technique was used to select 152 sample farmers to collect primary data pertaining of 2016/17 production year. Both primary and secondary data sources were used for this study. Stochastic production frontier approach and two limit Tobit model was employed. The stochastic production frontier model indicated that input variables such as mineral fertilizers, land and seed were the significant inputs to increase the quantity of wheat output. The estimated mean values of technical, allocative and economic efficiency were 78, 80 and 63% respectively, which indicate the presence of inefficiency in wheat production in the study area. A two-limit Tobit model result indicated that technical efficiency positively and significantly affected by sex of the household head, education, extension contact, off/non-farm activity and soil fertility but negatively affected by land fragmentation. Similarly, age, education, extension contacts and off/non-farm activity positively and significantly affected allocative efficiency. In addition, economic efficiency positively and significantly affected by sex, age, education, extension contact, off/non-farm activity and soil fertility. The policy measures derived from the results include: expansion of education, strengthening the existing extension services, establish and/or strengthening the existing off/non-farm activities and strengthening soil conservation practices in the study area.