Bread wheat is one of the most important cereal crops of the world and a staple food for about one third of the world’s population and is a major cereal crop in Ethiopia. One of the major challenges in improving food security is to develop varieties that are adapted to specific environment and farmers’ needs. Field trials were conducted at two locations, Hitosa (Sero-Anketo kebele) and Limu Bilbilo (Bekoji-Negesso kebele) districts, in Arsi zone of Oromiya regional state, Ethiopia in 2015. The objectives were to identify farmers’ and traders’ preferences and selection criteria and acceptable varieties among the tasted twenty-five bread wheat varieties through farmers’ participation. The experiment was laid out in lattice design with three replications in which farmers participated only in one of the replication for ranking. Farmers and traders identified top seven criteria that are the same at both locations (that is, disease and insect resistance, grain yield, spike size, seed color, tillering capacity, market demand and seed size, except seed weight instead of seed size at Seru-Anketo) for rating of varieties from 1 to 5 scale (1=very poor and 5=excellent). Data analysis was done using SAS and Microsoft Excel. All varieties showed resistant type of infection for the three rusts (Stem, Yellow and Leaf) at Bekoji-Negesso: As all varieties scored <20 ACI. Similarly, at Sero-Anketo, Kakaba, Digelu and Jefferson ranged under MS to S whereas Gassay, Hiddasse, and Mekelle-02 ranged under MS and MR types of infection for SR, respectively. Grain protein was analyzed and Hoggana (14.27%) was found to be the highest. Based on measured trait (rusts resistance) and farmers’ and traders preferences ranking; Bika, Bulluk and TAY for Bekoji-Negeso and Mekelle-4, Ogolcho and TAY for Sero-Anketo were recommended with their full production packages. Therefore, participation of farmers in early breeding program could be one of the approaches as to identify the best variety for specific location. Key words: Direct matrix ranking, grain protein, pairwise ranking matrix, participatory varietal selection (PVS), rust.