The increasing global population and water demand are creating pressure on the sustainable use of water sources, potentially reducing irrigation availability. Improving water use efficiency is crucial for addressing future water scarcity. A field experiment was conducted in Sekota woreda at Wolleh irrigation scheme to investigate the impact of deficit irrigation on yield and water productivity of Bombay red variety onion. The experiment was set using the randomized complete block design with nine treatments and three replications, involving 25% and 50% deficits at the development, mid, and late stages of onion growth, along with a control receiving 100% of the crop water requirement throughout the growing season. Crop water requirement was estimated using the CropWat model, and data analysis was conducted using the SAS statistical software method. The results indicated that deficit irrigation at different growth stages had significant effect (p≤0.01) on plant height, leaf length, bulb diameter, bulb length, marketable and unmarketable yield as well as biomass of onion. The maximum (25.2t/ha) and minimum (16.4t/ha) marketable yield were obtained from treatments receiving 100% and 50 % ETc throughout the growing season respectively. The highest CWUE of 6.39kg/ha was obtained from 50% ETc irrigation application. The severe yield reduction of 55.27% was obtained from 50% deficit at all stages excluding the initial stage which is establishing period. 25% deficit at development and late stage showed 6.36% yield reduction and saved 12% irrigation water. The maximum net income and maximum marginal rate of return was 684130.28ETB/ha and 969.66% obtained from treatments that irrigate 25%ETc deficit at development and late stage while applying full irrigation at mid or bulb formation stage. The study showed that increased water saving and water productivity were obtained from the 25% deficit irrigation at development and late stages followed by applying 100%ETc at development and only 75%ETc at mid and late stages respectively. Hence, applying deficit irrigation at recommended levels can reduce the problem of water shortage with no significant yield reduction. Key words: water productivity, onion, Sekota, marketable yield, wolleh, growth stage