Despite the fact that water is the most limiting factor for crop production in the semi-arid areas, limited information has reported on the application of deficit irrigation. Hence, the field experiment was conducted in Axum area (Northern Ethiopia) during the dry season to investigate the influence of deficit irrigation on onion yield and water use efficiency (WUE) under drip irrigation. Saving of water deficit irrigation can be used to irrigate additional cropped areas. Deficit irrigation increased the WUE of onion from a minimum of 4.3% to a maximum of 7.8% by partially stressing the crop at 80% and 60%ETc of the optimum application throughout the growing season. Based on the partial budget analysis, the highest net benefit was obtained through 20% deficit at the 4th stage amid a net benefit of (107,680 birr/ha and a marginal rate of return (MRR) of 4985%. Therefore, application of 20% deficit at the 4th stage of onion crop (382.1 mm/ha ) in five days interval is found to be economically feasible and is recommended for Axum area and other similar agroecological conditions under drip irrigation system.