In Ethiopia, onion is one of the most important vegetables/spices produced as a source of cash income and for flavoring foods. However, postharvest loss during storage remains a major challenge. In this study, the effects of variety (Bombay red, Qellafo and Sweet carolin) and drying temperature (Fresh, 50, 60, 70, 80, and 90°C) on physicochemical quality, functional property, and sensory acceptability of dried onion powder were determined. The results indicated that total color change of Bombay red was not affected by temperature, but Qellafo and Sweet carolin varieties showed an increase in color change as drying temperature increases. Bulk density, shrinkage ratio, and water hydration capacity increased with increasing temperature for all three varieties. The degradation of vitamin C, pyruvic acid, and desired sensory attributes increased with increasing oven drying temperature. All in all, Qellafo dried at 70°C for 5 hr was found to be desirable for production of dehydrated onion powder. The findings of this study will allow the identification of the best of the three commonly grown onion varieties in Ethiopia, and the preferred temperature for production of dried onion with minimal negative effect on physicochemical, functional, nutritional, and sensory properties.