Today’s agriculture sector faces a complex series of challenges to cope with the demands for sustainable management and production, which entails an increase in food production to ensure food security while using less water per unit of output and reducing nitrogen (N) fertilizer losses through leaching. The experiment was conducted at Adami Tulu Agricultural Research Center on-station to study the effect of different irrigation levels and N-fertilizer rates on plant height, bulb yield, bulb diameter, and bulb height and water productivity of onion. The treatments of the experiment had factorial combinations of three levels of watering and four N-fertilizer amounts. Results indicated that the highest plant height (53.07 cm), bulb height (6.13 cm), bulb diameter (6.21 cm), marketable bulb yield (241.39 qt/ha) and total bulb yield (252.89 qt/ha) were obtained from full irrigation and fully N-fertilized compared to the deficit conditions. The highest water productivity was recorded from 60% ETc irrigation level and 150 Kg/ha N-fertilizer application rate, but the reduction in water productivity with 80% ETc and 150 Kg/ha N-fertilizer application rate was not significant. Hence, if water is not limiting factor, 100% ETc irrigation level and 150 Kg/ha N-fertilizer could be suggested to apply. But if water becomes 232 limiting factor, 80% ETc irrigation level with 150 Kg/ha N-fertilizer would be more appropriate for growing onion in the study area. Therefore these can be used as one package of onion production technology and all growers better to apply.