The contribution of Service sector to the development of both developed and developingrneconomies is increasing from time to time. However, many developing countries, including thatrnof Ethiopia, are blamed for delivering high-cost and nnproductive input services, thereby limitingrneconomic efficiency gains from trade reforms. This, calls for liberalization of the sector so that itrnimproves welfare and enhance economic growth. Ethiopia has also requested to access WorldrnTrade Organization in 2003 and the country is still underway to access the institution.rnThus, this study has focused on the impact of the service sector liberalization on welfare of therncountry. To meet its objective the study has undertaken qualitative assessment and quantitativernassessments. The qualitative assessment compares the Ethiopian service sector policy to GATSrnprinciples and concludes that the liberalization will have positive impact on sectors likernconstruction and transport service sub-sector which are relatively strong enough to compete withrncompetitors.rnThe quantitative assessment has tried to quantify the net welfare impact of the liberalization withrndifferent scenarios at macro level using CGE model. The result of the simulations shows that therncountry derives higher welfare gain from liberalizing its service sector. Moreover, therncomparison of service sector liberalization and goods trade liberalization shows that there isrnhigher welfare gain in case of goods trade liberalization than service trade liberalization due tornthe relatively low protection in service sector than goods sector. Finally, simultaneousrnliberalization of the service and goods trade also shows higher welfare gain even though thernwelfare is less than the additive welfare of the separate liberalization of the tow sectors.