The grade standards have been developed for ascertaining the quality of cashew nuts and quality-price relationship has been studied in the North District of Goa, based on the data collected through personal interview for the year 1999-2000. Laboratory analysis, indexing, stepwise multiple regression analysis and tabular presentation have been employed for data analysis. Laboratory analysis consisted of generating data on qualitative variables, namely (i) number of nuts per kg, (ii) extraneous matter, (iii) void nuts, (iv) broken and damaged nuts, (v) oozing of liquid from cashew nut shell, (vi) cutting test, (vii) floating test, (viii) length, (ix) width, (x) thickness, (xi) moisture percentage, and (xii) recovery of kernels. By assigning appropriate weightages to these qualitative variables, scores have been worked out by adding the 12 quality parameters multiplied by the respective weightage. The total score so obtained has constituted the basis for grades. Five grade standards have been developed for cashew nut, based on composite index. It has been found that the number of nuts per kg, moisture percentage and cutting test reduce the prices and these factors could explain 98 per cent variations in price. All variables have been found to have the expected signs and only three variables, namely number of nuts per kg, floating test, and length have been observed significant in price determination. These results could be used as a guide by the farmers for fetching better price in the market, and by buyers for getting product of ascertained quality.