Off balance sheet activities have become an issue of global significance and havernreceived attention for being a source of fee income that is beyond a bankâ€™s balance sheetrnactivities and avoiding regulatory costs. Although much literature is available on off-rnbalance sheet (OBS) activities in banking system, this is the first paper that investigatesrnthe off-balance sheet activities in Ethiopian banking industry. It aims to test the taxrnregulatory hypothesis and market discipline hypothesis in determining OBS activities ofrnEthiopian commercial banks using panel data set during the period of 2005-2012, with arnsample of eight Ethiopian commercial banks. To answer research questions and test thernhypotheses the study adopted the quantitative research approach. The model considersrnthe impact of size, profitability, loan, credit risk, efficiency, market concentration, capitalrnadequacy, reserve requirement, real GDP, interest rate spread and inflation on offrnbalance sheet activities of banks. The estimation results show that all bank-specificrndeterminants, with the exception of credit risk and loan, significantly affect commercialrnbanks off balance sheet activities in Ethiopia. From the regulatory factors reservernrequirement is also a significant determining factor of off balance sheet activities, whererncapital adequacy requirement negatively affects OBS activities but not significantly.rnFinally, with regard to macroeconomic variables, only inflation exhibits insignificantrnrelationship with banksâ€™ OBS activities. The implications of these results suggest thatrnregulations, institutional, and technological deficiency in Ethiopia prevent the bankingrnsystem from adopting different financial innovations. The results of the study are of valuernto both academics and policy makers.rnKeywords: Off-Balance Sheets Activities, Regulatory tax hypothesis, Market disciplinernhypothesis and Commercial Banks