Soybean (Glycine max (L.) Merrill) is the most important source of protein, oil and also cash for poor farmers. Lack of improved variety and optimum phosphorus fertilizer rate are the most important limiting factor for the productivity of soybean. Therefore, an experiment was carried out at Omo Kuraz-1 Sugar Development Project during 2018 cropping season to determine the effect of phosphorus (P) fertilizer levels on yield and yield related traits of soybean varieties. Factorial combination of three soybean varieties (Nova, Awassa-04 and Gazolia) and four rates of P fertilizer (0, 23, 46 and 69 kg P205/ha were laid out in a RCBD with three replications. Data were collected for yield and yield components and analyzed using Statistical analysis software (SAS and Genstat). The analyses of variance showed that there was significant difference (p≤ 0.001) among the varieties for the entire tested parameters, indicating the presence of ample genotypic variation among then Awassa-04 Variety produced significantly high grain yield (1183 Kg ha-1 as compared to Gazolia (950 Kg ha-1) and Nova (566 Kg ha-1). Interaction of variety Awassa-04 with 69 Kg P205 ha -1 showed maximum grain yield (1352 Kg ha-1) while the minimum value (403 Kg ha-1) was recorded for interaction of Nova variety with 0 kg P205 ha-1. Based on the economic analysis phosphorus fertilizer application at rate of 69 Kg P205 ha –1 resulted in highest marginal rate of return (350.9%). Therefore, it was conclude that phosphorus fertilizer application at rate of 69 Kg P205 ha-1 can be recommended for the study area. However, further study should be done on different rate of phosphorous to come up with a more comprehensive recommendation.