With declining Irish potato production trends in Kenya this paper identifies and analyses factors that influence the economic efficiency of smallholder Irish potato producers in Kenya by drawing on data from random sample of 130 smallholder farmers from Nyandarua North district. A dual stochastic parametric decomposition technique is used to disaggregate economic efficiency components and a two-limit Tobit model is used to derive efficiency indices as a function of a vector of socio-economic characteristics and institutional factors. Empirical results show decreasing returns to scale in production. The mean economic efficiency is 0.39 with a range of 0.12 - 0.66. Education, access to extension, access to credit and membership in a farmers association positively and significantly influence economic efficiency. Innovative institutional arrangements that enhance extension and farmer training, accompanied with improved access to credit is likely to enhance potato production efficiency.