Soil acidity is one of the chemical soil degradation issues which affect soil productivity in Ethiopian highlands. A field experiment was conducted to evaluate the effects of rhizobium inoculation, lime, and starter nitrogen application on soil health, and Faba bean (Vicia faba L.) yield at Koga Irrigation Scheme, north- western Ethiopia. The three factors, lime rates (0, and 2 t ha-1), starter nitrogen (0, 10 and 20kg•ha-1), and rhizobium inoculation (control, strain1 (EAL17) and strain2 (EAL1035)) were combined in 2x3x3 factorial arrangement of randomized complete block design in three replications. Disturbed and undisturbed soil samples were collected before and after treatment application. The data were collected on soil, yield and yield components of Faba bean and subjected to the analysis of variance (ANOVA), and analyzed using SAS Software version 9. The ANOVA results revealed that plant height, number of pods per plant, number of seeds per pod, effective nodule number hundred seeds weight, above ground biomass, and grain yield were highly significantly (p<0.001) affected by the treatment. The bulk density, total porosity, soil pH, av.P, TN (%), %OC and CEC were also significantly affected by the treatment. This indicated that the combined application of lime, rhizobium strain, and starter nitrogen improved soil health and Faba bean yield. The highest grain yield (2933.03 kg ha-1) with the highest net benefit (212345.84 ETB ha-1) was obtained from the application of 2 ton ha-1 lime, rhizobium strain 2(EAL 1035), and 20 kgha-1 N. Whereas, the lowest grain yield (725.9 kg ha-1) was recorded from the control treatment. The correlation analysis indicated that there was highly positively significant (p≤0.01) correlation of grain yield with yield related parameters. The economic analysis was done following the methodology of CIMMYT (1988). Economically the highest net benefit (212,345.84 ETB ha⁻¹) with a marginal rate of return of (3358.03%), achieved from the combined application of 2 t ha⁻¹ lime, rhizobium strain EAL 1035, and 20 kg ha⁻¹ nitrogen, indicating that this combination is economically profitable and technically sound for smallholder farmers in acidic soil in the study area and similar agro ecologies.