In the growth and development literature, capital accumulation and industrialization arernconsidered the crucial and critical key to economic growth. Given this, many developingrncountries particularly Ethiopia which follows agriculture led industrialization policy madernnumber of attempts to increase ratio of investment in the country. Tax incentives schemes arernamong the attempts made to create investment friendly environment.rnThis study poses a general question of whether or not domestic manufacturing investment havernincreased in Ethiopia because of the tax incentives offered; and thus whether or not offeringrnsuch incentives has been beneficial to the country.rnTo answer this question the study adopts mixed methods of research by using both descriptivernand inferential statistics where primary data is collected using interview with MOFED andrnERCA officials and secondary data is collected from different sources such asrnMOFED,EIA,ERCA,IMF and World bank.rnDescriptive statistics is used to analyze the trends of domestic manufacturing investment, taxrnrevenue and expense rate of Ethiopia. Inferential statistics is also used by employing time seriesrnOLS model. A 23 years secondary data from 1992-2014 was collected then time series OLSrnregression was applied by employing Log DMIN as dependent variable along with tax incentivesrnas independent variable and GDP growth rate, inflation, market openness and Log transportrnavailability as control variables. The regression analysis is conducted using Eviews 8 softwarernand to account for inherent problems of time series data, different tests such as correlation,rnautocorrelation and stationarity test were applied.rnThe regression result show that tax incentives and market openness have significant positivernlong run effect on private domestic manufacturing investment, inflation on the other hand hasrnsignificant negative long run effect. Hence to promote the performance of domesticrnmanufacturing investment in the country, the study recommended that the government shouldrncontinue marketing the tax incentive scheme and bring them to be on budget. Further the studyrnrecommended that the government should continue working on improving the trade andrninfrastructural environment of the country