Soil acidity is one of the major problems affecting crop productivity in the highlands of Ethiopia, particularly in Banja district, northwestern Ethiopia. The amendment of these soils has a key role in enhancing their productivity. This study was conducted in the 2020 cropping season to evaluate the response of soil properties and yield of bread wheat (Triticum aestivum L.) to lime and compost application on acidic soil. The experimental design was a randomized complete block design with three replications. The treatments were factorial combinations in compost (0, 5, and 10t ha−1) and lime (0, 0.79, 1.58, and 3.17t ha−1). Soil properties and agronomic data were collected based on standard procedures. At 5t ha−1 compost and 3.17t ha−1 lime, soil pH increased from 4.74 to 5.54, while exchangeable acidity and Al3+ were reduced to initial values by 1.91cmol (+) kg−1 and 1.83cmol (+) kg−1, respectively. Plots amended with 3.17t ha−1 lime and 10t ha−1 compost provided the highest biomass (8.15t ha−1) and grain yield (3.33t ha−1). Conversely, the lowest biomass (2.92t ha−1) and grain yield (0.91t ha−1) were obtained from the control. The highest yield was obtained from the combined application of 3.17t ha−1 lime and 10t ha−1 compost, the cost of this treatment 18559birr ha−1, while the cost of 10t ha−1 compost was 10,000birr ha−1. Hence, compost application is economically feasible and affordable for small-scale farmers, providing a net benefit of 70,330.7birr ha−1 which implies that combined application of lime and compost improved soil properties and yields in the study area.