Th e paper deals with the development and main determinants of the profi tability of Czech dairy farms. Th e aim of the paper is to evaluate the diff erences in the dynamics of profi tability for two types of milk producers -specialized dairy farms and mixed farms -within the context of the agricultural policy changes. Th is aim is achieved by decomposing profi tability into output growth, output and input price changes, changes in decoupled subsidies, technical change, scale, mark-up, and technical effi ciency change components based on input distance function estimation. Based on the panel data obtained from the FADN database in the time period 2004-2011, it was found that the change in profi tability was positive in the analysed time period, and slightly higher for the specialized dairy farms than for the mixed ones. Th e changes in output price, mark-up component and technical change are the main determinants of the development of profi tability. Agricultural policy measures had diff erent eff ects on these components. Th e strongest correlation was between the operational subsidies and the technical change and technical effi ciency change, and this correlation was negative.