The study was conducted in Debay Tilat Gin District East Gojjam Zone Northwestern, Ethiopia with the objectives of characterization of dairy production systems and monitoring the milk production potential of local cows. A total of 195 sample respondents who own at least one dairy cow were selected by using simple random sampling technique. Monitoring of on-farm milk production potential was conducted on 40 lactating cows (20 cows from highland and 20 cows from midland agro ecologies) with different parity and stage of lactations. Data was collected using mainly semi-structured questionnaires. Rural small-holder (93.3%) and peri-urban dairy production systems were identified in the study area. Major livestock feed sources were natural pasture ranked 1st and the major source of water was a river (77.7%). Majorities (90.8%) of respondents have owned non-characterized local breeds of cattle and 88.2% of them were used natural mating. Major constraints affecting dairy production were feed shortage, lack of improved breed, prevalence of diseases, market problem, and water scarcity. Mean daily milk yield, lactation length, age at first service, number of services per conception, age at first calving, dry period, and calving interval of local cows were 1.76±0.31liters per day/cow, 6.92±1 months, 3.25±0.60 years, 1.98±0.58, 3.94±0.36 years, 2.78±0.82months and 2.00±0.27years, respectively. From the monitoring, average milk yield for local cows were 2.19±0.40, 1.79±0.23, and 0.93±0.16liters/day/ cow for early, mid and late stages of lactation, respectively. Agro ecology, stage of lactation, parity of cows and milking time significantly (p<0.05) affected the milk yield of local cows. It was concluded that due to poor husbandry practices, the productive performance of local cows is low. Therefore, intervention on husbandry practices mainly improvement of feed and breed should be done to increase milk production and productivity. Key words: Agro-ecology, dairy production systems, local cows, milk yield