The study was on “Commercial Seaweed Farming in Zanzibar Coastal Villages: Potential for Innovative and Competitive Economic Growth”. It aimed at assessing the competitive potential of Zanzibar seaweed farming for the purpose of improving the crop commercial aspect. The study assessed business management capacity; economic return; business model and level of value addition initiatives on seaweed farming. It applied both descriptive statistics and regression analysis in order to achieve results. This study was conducted in Unguja and Pemba Islands, Zanzibar, Tanzania. The study applied survey design using structured questionnaire. Questions and variables were tested by interviewing a small sample of farmers prior to commencement of enumerators’ training. A minimum sample of 400 respondents were picked out of 23,000 farmers through the application of Slovan’s formulas (n = N / (1 + Ne2). However, the study managed to interview 592 farmers from 48 seaweed producing villages. Systematic random sampling was used to pick villages and interviewed farmers were randomly selected. The study found that farmers were significantly not realizing economic returns due to most of production being below breakeven point (1,439 kgs of dry seaweed per cycle). This is contributed by various constraints such as small farm size, lack of technology, and low innovation up scaling and low entrepreneurship skills. The industry is not linked to multi stakeholders (e.g. Financial Institutions, Research, Science and Technology) and as a result it lacks support from other sectors due to farmers consistently dependence on exporters for seaweed market (Farmer-Exporter Model). Value addition activities in seaweed farming lack scaling up mechanisms compared to other seaweed producing countries such as the Philippines, Indonesia and Solomon Islands. Despite the challenges, there is still potential for commercializing Zanzibar Seaweed farming and that the sector is key for competitive economic growth if: development of seaweed policy and strategic plan are developed; entrepreneurship, research, technology and innovative up scaling system are promoted; multstakeholder business model is enhanced; youth and men are engaged in seaweed farming; and access to seaweed market information and financing are increased.