Abstract: This study examined the technical efficiency of cocoa productivity through contract farming in Tanzania for improving livelihoods of smallholder farmers. Probability sampling was used to select 271 respondents (131 respondents from Kilombero and140 from Kyela Districts). A cross-sectional data were collected using structured questionnaire from cocoa smallholder farmers. The data was analyzed by using NLOGIT software version 5. The results show that the mean technical efficiency was 79.7% and 61.6% from Kilombero and Kyela Districts respectively. Smallholder farmers from Kilombero District were more efficient than Kyela District within contractual arrangement. These smallholder farmers were technically efficient in terms of number of hours spent in farms, labour training, experience, distance and Size of labourer. Moreover, results show that smallholder farmers agreed that being in contract had increased access of training (89.3% (n=242)), credits (80.8% (n=219)), production quantity (73.1% (n=198)), production acreage (71.7% (n=194)), timely purchase (92.9% (n=252)) and timely payment (95.2% (n=258)). However, results show that 67.47% of respondents disagreed that contract farming did not provide timely inputs and 74.9% of respondents disagreed that contract farming helped to introduce new technology. Therefore, findings suggest that contract farming contributed a lot on improving smallholder farmers’ livelihood within contract farming.