The purpose of this research is to identify the factors significant to explain Ethiopian commercialrnBanks liquidity. This study has categorized the independent factors into bank specific factors andrnmacroeconomic factors. The bank specific factors include Bank Size, Capital Adequacy,rnProfitability, Non-Performing Loans, and Loan Growth while the macroeconomic factors includernGross Domestic Product, General Inflation and National bank Bill. The panel data was used forrnthe sample of eight commercial banks in Ethiopia from 2002 to 2013 year and estimated usingrnFixed Effect Model(FEM), data was present by using descriptive statistics and the balancedrncorrelation and regression analysis for liquidity ratios was conducted. The findings of the studyrnshow that capital strength and profitability had statistically significant and positive relationshiprnwith banksâ€™ liquidity. On the other hand, loan growth and national bank bill had a negative andrnstatistically significant relationship with banksâ€™ liquidity. However, the relationship for inflation,rnnon-performing loans, bank size and gross domestic product were found to be statisticallyrninsignificant. The study suggests banks must have increase their outreach to tens of millions ofrnpeople by openings up more and more branches every year through country, and havernsignificantly improve their banking service by introducing new product and services like Agentrnbanking, Mobile banking and Internet Banking through the application of modern technology.rnMoreover, banks in Ethiopia should not only be concerned about internal structures and policies,rnbut they must consider both the government regulation and the macroeconomic environmentrntogether in developing strategies to improve the liquidity position of the banks.rnKey words: Ethiopian commercial banks, determinants of liquidity, liquidity ratios, liquidityrnrisk, panel data regression analysis.