The efficiency of paddy farms in the Union Territory of Pondicherry has been measured for the year 2005- 06 using data envelopment analysis (DEA). It has revealed that about 12.62 per cent of the farmers who operate rice farms belong to the most efficient category (90-100 per cent) and 23.45 per cent belong to the least efficient group (less than 50 pr cent), with the mean technical efficiency of 64 per cent. The allocative efficiency measure has indicated that about 15.86 per cent of the farmers belong to the most efficient category and 21 per cent to the least efficient group, with the mean allocative efficiency of 76 per cent. This suggests that the farms on an average, produce only about two-thirds of the potential output level. Also, there is possibility to increase the output level by 36 per cent in the short-run. The mean allocative efficiency measure has indicated that the rice farmers could reduce the costs by about 24 per cent by adoption of appropriate technologies and management practices. The returns to scale co-efficient have been found fairly distributed, suggesting that there is no systematic pattern in farms being too big or too small. More than one-third of the farmers belong to the most efficient scale group (90-100 per cent) and 4.18 per cent operate the farms in the least scale efficient group. Most of the allocative inefficiency can be attributed to over-use of labour, fertilizers and chemicals and this situation warrants policy interventions. Concerted efforts are essential to bridge the gap between awareness level and adoption of technologies by strengthening the agricultural extension system.