Nutrition-sensitive agriculture is an approach that aims to ensure the production of affordable, safe, culturally appropriate, and nutritious foods in sufficient quantity and quality to meet dietary needs. This study aims to examine the production pathway by which smallholder farmers adopt nutrition-sensitive agriculture in northwest Ethiopia. Data were collected from 478 randomly sampled households through a structured questionnaire-based survey, observations, and group discussions. Descriptive and inferential statistics were employed for analysis. Binary logistic regression analysis was used to estimate the influences of demographic, socioeconomic, and institutional explanatory variables on the production of various food groups in households. Arable land owned by households, the use of irrigation, access to the nearest markets, contacts with agricultural extension workers, and management practices affect plant-sourced food production. On the other hand, the number of livestock owned, the total crop produced, and contacts with extension workers affected animal-sourced food production. However, different factors, such as technological, institutional, and managerial challenges, that include dependency on rain-fed and free-grazing-based traditional herding systems adversely affect the production pathway to nutrition-sensitive agriculture. The study concludes that improving agricultural extension services, promoting small-scale irrigation schemes, and introducing improved animal feeding with improved crop and livestock management techniques could significantly contribute to increased household availability of diversified foods.