In Amhara region, Ethiopia red pepper is a major cash crop which is mainly produced by smallholder farmers. The basic objective of this study was to analyze profitability of red pepper production, determinants of household’s marketable surplus and the degree of market integration in major regional intermediate markets using primary data collected from households through semi structured questionnaire. The profitability analysis also indicates that red pepper production was profitable. The variables that influenced the marketable supply positively were agricultural experience, access to credit, yield, land size, current year and lagged prices. Among the significant variables yield and access to credit were highly significant at less than 1% significant level. The result of market integration analysis also shows that pepper markets in the western part of the region were integrated. The major problems identified are low access to improved inputs, collateral problem to get credit, poor storage facilities and low price of produce.