ABSTRACT A study on milk production handling, processing and marketing system was conducted in urban and peri-urban dairy production systems of Bahir Dar and Mecha districts of Amhara region. The data was collected between June and September, 2017. Purposive sampling was employed to select representative kebeles in both urban & peri-urban dairy production systems. Accordingly, 2 urban and six peri-urban kebeles were selected. A total of 264 households were selected by using systematic random sampling techniques. Questionnaire based interview, focus group and key informant discussions and monitoring techniques were employed to collect both quantitative and qualitative data. To complement the survey based information, 24 households (12 in each production systems) who had lactating cow were voluntarily selected and monitored for a month. The result indicated that, the average cattle herd size of households was 8.76+ 4.81heads, with no significant variations (P>0.05) between the production systems. According to the survey study milk production for crossbred dairy cows were 12.12+ 2.04 and 7.62+ in urban and peri-urban production systems, respectively. Indigenous dairy cows were only found in peri-urban production system with the average daily milk yield of 2.76+ 1.44 litters. The breeding systems used by respondents in both production systems were AI (58%), natural mating (15.5%) and both AI and natural mating (26.5%), respectively. The dairy cattle breed used for milk production in both production systems were crossbred cows (56.1%), local breed cows (18.9%) and both local and cross breed cows (25%). Major feed resources used by the households were crop residue and hay, industrial by products (oil cake, bran and local beverage,) natural pasture grazing and concentrate feeds. Water sources for animals in both V I production systems were river, hand dug well, supplied pipe/thank and spring water. All (100%) dairy cow producers in both production systems had an experience of processing milk in to other milk products. In the urban production system only 18.2% milk was processed for marketing whereas, 89.4% in peri-urban production system were processed for marketing. Guard (59.1%), clay pot (18.2%) and plastic container (13.6%) in the urban production system and gourd and clay pot 71.7% and 26.3%, respectively were used as milk processing materials. Aluminum/stainless steel 31.8 and 21.2%, plastic container 51.5% and 41.9% and guard 16.7% and 30.8% in urban and peri-urban production systems, respectively were used as milk and milk products handling materials. Raw milk and butter 81.8% and 18.2% in urban and 31.3% and 68.7% in peri-urban production systems, respectively were the major identified marketable products. Both formal and informal marketing systems were existed in the production systems. Formal marketing was the dominant marketing system in the urban production system. The dairy production in the study areas was constrained mainly by shortage of sustainable land (84.8%) and high feed price (81.8%) in the urban and market fluctuation (83.53%) and disease problem (72.2%) in peri-urban production systems, respectively. The increasing demand for milk and milk products (81.8%) and the presence of dairy cooperatives, milk processors and hotels/cafes (74.2%) in urban and the presence of cooperatives, milk collectors and cafes (74.6%) and government and non-government supports (65.9%) in peri-urban production systems were the major ranked opportunities for sustainable dairy sector development in the study areas. Generally, the author suggested that solutions for the constraints and use properly the identified opportunities can improve the dairy sector in the study areas. Key words: Dairy, production system, marketing, processing, urban and peri-urban