The aim of the paper is to investigate the challenges and prospects of ethnic-based politics on national unity of Ethiopia. To address the objectives of the study, the researcher employed qualitative approach with case study as study design and used primary and secondary data sources. Primary data was collected from the key informant interview and FGDs. Secondary data was collected from different books, reports, journals, published and unpublished proclamations, conference papers, dissertations and FDRE constitution. In this study the researcher has been used purposive sampling and thematic analysis method based on the objectives of the study. With the view of ensuring unity with diversity the finding of the study has revealed that ethnic-based political parties have daunting challenges for national unity. In this regard, they are playing in the politicizing of ethnicities, ethnic autonomy conflicts and intra-regional boundary conflicts and self-determination and secessionists feeling were discussed on the challenges of national unity for the country. Despite the negative impacts there appeared to be helped role in the empowerment of minority groups and advocacy of culture of ethnic groups in Ethiopia. Consequently, to realization of national unity of Ethiopia, the possible tools have been investigated: the constitutional and electoral reform, the intra-regional boundary demarcation, empowerment of multinational and civic oriented political parties, national consensus and reconciliation. The researcher argues that ethnic politics can also be playing divisive factors which can seriously challenging the mutual existence of Ethiopia and make the quest for national unity difficult. Therefore, it recommends that the view that national unity can be achieved when ethnic politics becomes a tool for the accommodation of diverse political programs.
Keywords: Challenge, Ethnicity, National Unity., Politics, Prospect, ethnic politics