This study is aimed to develop the utilization agricultural residues to produce activated carbon on macadamia nutshell via physical activation by two step processes. The first step, macadamia nutshell carbonized in muffle furnace. The second step, macadamia nutshell char was activated in a fixed bed reactor by using steam and the mixture of steam and air as oxidizing agent to compare in term of adsorption capacity of activated carbon. The effects of operating parameters such as carbonization time, carbonization temperature, activation time and activation temperature were studied in order to evaluate the optimum condition. From the experimental results, the optimum condition of carbonization was 500 oC and 60 min and this condition provided volatile matter, fixed carbon and yield of char were 24.16 wt.%, 68.26 wt.% and 34.97 wt.%, respectively. Furthermore, it was found that both of activation temperature and activation time have more developed pore structure and adsorption capacity of activated carbon. The BET surface area and adsorption capacity of activated carbon by steam activation with air is higher than activated carbon by steam activation. In addition, steam activation with air can significantly modify the textural properties of activated carbon. These enhance the acidic surface functional group on activated carbon with pHIEP of 3.0 - 3.7. It was concluded that macadamia nutshell could produce high surface area of activated carbon by using physical activation with the BET surface area of ranging from 476.7 to 1022.0 m2/g.