The main objective of the study was to assess the impacts of population pressure (and hence diminutive farm size) on agricultural performance (land and labour productivity) and the agricultural system in the Wolenkomi area of Oromiya Region. Both survey and secondary data were used as method of data collection. The analysis was based on cross-sectional data collected from 533 plots of 120 farm households randomly selected in 2005. A logistic regression model was employed to identify determinants of farm intensification practices and then an Ordinary Least Square (OLS) regression model was applied to identify the determinants of agricultural productivity, and land and labour productivity. The results of the logistic regression model application indicate that intensification in terms of manure and fertilizer use in the study area was not population pressure driven but rather appears to be more related to land characteristics, crop choice, and social and institutional factors. However, population pressure has affected intensification through its indirect impacts on farm size and fragmented landholdings due to land redistribution. According to the results of OLS regression, significant and positive relationship between workforce and land productivity on the one hand and positive and significant off-farm participation on both land and labour productivity on the other hand may indicate that improvements in labour markets through creation of off-farm employment may enhance productivity. Further, credit provision without streamlining and close supervision may not necessarily lead to higher productivity. The positive and significant relationships between an economically active labour force, consumer unit per hectare and land productivity are in line with Boserup’s (1965) thesis and have important theoretical implications. It is therefore recommended that promoting the functions of the factor market such as land, labour and oxen power, and introducing credit institutions and off-farm opportunities as well as farmers’ access to extension advice and assistance should all be given priority in policy making and application.