I just installed monodevelop on Arch Linux using pacman. I can compile with the mcs command, but I can not build in monodevelop. I am told "MSBuild process could not be started". The same error is given if I try building with mdtool on the command line.
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I'm facing the exact same problem. I also installed Arch Linux today and am not able to compile in Mono Develop. – Alebo May 22 '15 at 16:14
2 Answers
Go to the project options of your project in monodevelop. At Build -> General, there is a new option called Use MSBuild engine (recommended for this project type)
. Uncheck this option.

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Please refer to post Bug 33896 - Build fails if LANG is set to a UTF8 locale.
Basically you have to start monodevelop with something like LC_ALL=C monodevelop
and you can use MSBuild.
Even better option is to enable non-utf8 locale for your region. Edit the content of /etc/locale.gen
and un-comment your non-utf8 regional locale. Then run command
locale-gen
to regenerate locales and
locale -a
to verify that new locale is available. In my case (Slovenia) I then start monodevelop with
LC_ALL=sl_SI monodevelop
Or you can disable MSBuild as described in previous answer.

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