Smallholder farmers' decisions to adopt adaptation options in response to climate change and variability are influenced by socioeconomic, institutional, and environmental factors, indicating that decision patterns can be very specific to a given locality. The prime objective of this research is to identify factors affecting smallholder farmers' decisions to adopt adaptation options to climate change and variability in the Muger River sub-basin of the Blue Nile basin of Ethiopia. Both quantitative and qualitative data were collected using a semi-structured questionnaire, focused group discussions, and key informant interviews from 442 sampled households. Frequency, mean, Chi-square test, and one-way ANOVA were used for analysis. Furthermore, a multinomial logit model was employed to analyze the data. Results signified that small-scale irrigation, agronomic practices, livelihood diversification, and soil and water conservation measures are the dominant adaptation options that smallholder farmers used to limit the negative impact of climate change and variability in the study area. The results further revealed that adoption of small-scale irrigation as an adaptation to climate change and variability is significantly and positively influenced by access to credit, social capital, and the educational status of household heads. Greater distance to marketplace and size of farmland negatively affected the use of agronomic practices, whereas crop failure experience and access to early warning systems have a positive influence. The results also point out that adoption of soil and water conservation measures are positively affected by exposure to early warning systems, greater distance to the marketplace, and larger size of cultivated land. It is also noted that livelihood diversification is negatively influenced by socioeconomic factors such as education, the gender of the household head, and livestock ownership. Overall, the results suggested that improved policies aimed at increasing the adoption of adaptation options to offset the impact of climate change and variability should focus on: creating effective microfinance institutions and effective early warning systems, increasing farmer awareness, improving infrastructure, and encouraging farmers' membership to many social groups. The results further suggested that agroecological and gender-based research should be promoted and increased for a more holistic understanding of farmer adaptation options.