Continuous increase of population in Ethiopia, high water demand, occurrence of drought and poor efficiency of irrigation systems lead to real burden on the natural water resources. Finding optimal solution under high demand and limited water supply in the area of farm conditions is complex and requires the use of optimization methods. Thus, optimal irrigation planning and management should be considered for water resource allocation. In this study, linear programming (LP) model was applied for allocation of water for Koga irrigation scheme, Ethiopia using three level of deficit (10%, 20%, 30% ET) irrigation. The objective was to maximize annual net benefit and water productivity considering, water and crop diversification constraints. The model was solved using Microsoft Excel Solver and CROPWAT 8.0 model was used for estimation of crop water requirement at 80 % dependable rainfall. The study indicated that using deficit irrigation, a total of 241.2, 206.9, 179.6 million birr net benefit and 4.0, 3.8, 3.8 birr/m(3) water productivity were achieved using 10%, 20% and 30% deficit irrigation respectively while the actual practice were 229.8 million net benefit and 3.4 birr/m(3). Applying 10% deficit irrigation, the net benefit increases by 5 % while water productivity by 18% as compared to the existing practice. But using 20% and 30% deficit, the net benefit decrease by 10% and 22% respectively while water productivity remain better. Therefore, using 10% deficit irrigation, there could be possibility of irrigating 7349 ha land with better net benefit and water productivity.