In the 1980 's and 1990 's instead of government controlled centralized planning, there has beenrna renewed emphasis on market oriented strategy. Privatization is one of the parts of thisrnstrategy. One of the objectives of privatization is to increase efficiency through ownershiprnchange. in the theory of privatization it is believed that ownership matters i. e. the transfer ofrnproperty right from the public to the private sector will give incentive to increase efficiency. Inrn1950 's and 1960 's private ownership was dominant in Ethiopia, then in 19 70 's and 1980 'srnlarge and medium scale manufacturing industries were nationalized. In 1990 's Ethiopiarnundertook a reform program, privatization being one of the parts of this program. Studying thernimpact of privatization is important for policy makers in analyzing post-privatizationrnconsequences and derive policy in future privatization process. In this study a panel data for 25rnprivatized large and medium scale manufacturing industries covering a period of seven yearsrn(1992/93-1998/99) is taken and a test whether there is technical efficiency (TE) gain due tornprivatization is examined by using stochastic frontier model. The analysis is made in fivernsectors and first a test whether there exist some kind of inefficiency among firms is made. Thernresult showed that there exist inefficiency among all firms. The second test is made to identifyrnthe appropriate model. The impact of privatization on TE is then analyzed and it is found thatrnfor food processing sector, there has been a positive effect of privatization in improving TErnwhere as for beverage and textile and leather sectors there has been a negative effect ofrnprivatization in improving TE. For non-metal and wood and printing and chemical sectors it isrnfound that there is no significant impact of privatization in TE improvement. The results suggestrnthat for sectors with competitive behavior there has been a positive effect of privatization in TErnwhile for sectors with semi-monopolistic behavior there has been a negative effect ofrnprivatization on TE improvement. It is also found that sectors that under took new capitalrninvestment due to new capital investment criteria set by Ethiopian Privatization Agency(EPA)rnshowed a negative effect of privatization on TE . This suggests that there is a need to establishrnanti-trust laws, adjust some policy -related constraints that could discourage new entrants andrnaddress post-privatization issues in the future privatization process.