There has been an on-going debate since the introduction of  Bt cotton during 2002 in India on the superiority and/ or inferiority of Bt cotton over conventional cotton. Therefore, a  study was carried out to assess the effect of Bt cotton technology on output and efficiency of inputs used in cotton cultivation in Karnataka state of  South  India during 2005-06. The modified Cobb-Douglas production and decomposition analysis techniques were used to estimate the influence of factors and bt technology on output change. The production estimates revealed that output elasticities of inorganic fertilizers and organic manure had significant influence on yield of both Bt and non Bt cotton farms. However, plant protection chemicals had significant positive influence in Bt cotton production while it was negative and non-significant in non- Bt Cotton farms. With ratios of MVP to MFC equal to almost one,  indicated  an optimum use of plant protection measures by Bt cotton farmers. The decomposition analysis showed that per acre output of cotton in Bt farms was higher by 16% over non Bt farms, of which 32 % was contributed by Bt technology. Hence, Bt cotton needs to be expanded among all cotton growers in the state to harvest the benefits in terms of higher yield and income.