Crop production is a major livelihood activity of smallholders in Ethiopia. However, it is often characterized by low performance. In an effort to improve crop production, a series of agricultural extension programs have been running in Ethiopia since the 1950s. Nevertheless, the performance of agriculture is still low. In this study, it is argued that the limited attention given to cropland allocation methodologies is one of the major causes of low performance of crop production and increased environmental degradation. This study used linear programming to examine the role and impacts of cropland allocation methods on performance of crop production. The data for this study was drawn from household survey of 75 randomly selected households combined with focus-grouped discussion, key informant interview, and secondary data. In the current conventional cropland allocation, households were not able to meet their household consumption. The average profitability of farms under current practice was found significantly below than estimated optimal level of profit that could be realized using linear programming. In addition, it uncovered that low performance of crop production (in terms of meeting household consumption demand and profitability) is the primary cause that limited the effort of households to participate in environmental and natural resource management. This study suggests the use of linear programming-based cropland allocation to enhance the profit performance of smallholder crop production, meeting household consumption requirement, and thereby promote sustainable utilization of natural and environmental resources.