Climate change poses significant risks to Ethiopia’s coffee production, threatening both farmer livelihoods and the national coffee sector. Climate‐smart agriculture (CSA) offers strategies to enhance resilience in coffee farming systems. This study evaluated and prioritized CSA practices based on performance, implementation feasibility, and economic returns in Dale and Shebedino districts, Sidama Regional State, Ethiopia. A modified participatory CSA prioritization framework (CSA‐PF) was applied, integrating qualitative and quantitative data from farmer surveys, key informant interviews, literature reviews, and stakeholder workshops. Results indicated that productivity (37%) and income (27%) were the most heavily weighted indicators, followed by resilience (22%), with a statistically significant difference across weighted means (Kruskal–Wallis,
p
= 0.0083). Technical feasibility (26.5%) and technology cost (22%) scored highest among implementation criteria, whereas synergy with government policy scored lowest (15.5%) and was statistically nonsignificant. The most prioritized practices included disease‐resistant coffee varieties, coffee under shade trees, intercropping haricot beans after stumping aged coffee, and crop diversification (
p
< 0.001). Economic analysis revealed that the top three CSA practices achieved the highest net present value (NPV), internal rate of return (IRR), and benefit–cost ratio (B:C) over a 15‐year period. The net benefits of CSA practices improved by 53%–57.4% compared with business‐as‐usual (BAU) practices, a statistically significant gain (
p
< 0.001). These findings demonstrate that the modified CSA‐PF provides a robust tool for prioritizing interventions, guiding investment decisions, and informing context‐specific policy development. The study recommends further research on the adoption of bundled CSA practices and their broader social and environmental impacts. In conclusion, the modified CSA‐PF offers actionable insights for policymakers, extension agents, and farmers to implement sustainable, climate‐resilient coffee production strategies.