Abstract: The viability of dairy farming by smallholders is an outcome of various market access factors. This study was carried out to evaluate the profitability and management systems of dairying among households (n = 120) selected from two locations, Kamuli Town (urban) and Namasagali (rural) and who responded to a questionnaire during one-to-one interviews. Tethering of cows was the dominant system of management practiced, limiting feed intake and productivity. Most farmers (45%) kept crossbred cows that yield 1-5 L of milk for home use and sale to generate income. Milk prices were mainly determined by competitive pricing with farmers setting prices depending on their competitors’ prices. Profitability of dairying, assessed by regression was found to be affected by cattle owner’s age and education level, number of cattle kept, cattle management system, milk yield, revenue and total costs incurred per day. A unit change in any of these factors affected the gross margin. Revenue and total costs incurred per day were the most significant factors (p<0.05). Diseases, insufficient feeds, drought, labour shortage and absence of formal milk markets were the most constraining elements to dairy farming and efforts must be put to address them.