Currently only 26% of Ethiopian Population get safe drinkingrnwater, which is the lowest access to safe water provision in thernworld. The coverage of the rural areas is even lower at 19%,rnwhile in the urban areas it is 77% .rnThese facts are indicator of the necessity of a major effort tornimprove potable water in the country, particularly in the ruralrnareas. Provision and maintenance of safe water supply have to dorna lot with the capacity to pay for the services in addition tornsetting up facilities . A major question is whether users couldrnpay or not . This thesis addresses this issue using contingentrnvaluation method in the absence of directly observable demand forrnwater.rnA cross-section data was collected from eight peasantrnassociations and 228 farm households in the Ada'a-Liben districtrnto analyze factors that will determine rural households'rnwillingness to pay for improved rural water provision.rnHouseholds in this sample survey use different water sources.rnAmcng them 63.6% use poor "water quality for drinking fromrnRiver ,lake and well while 36 . 4% use from improved sources(handrnpump, electric pump and water vendor}.rnrnThe results of this study show that income, distance from currentrnwater source, quality of water type used and availability ofrncredit are the major determinants of willingness to pay for safernwater .rnThe policy implication of the study is that rural households arernwilling to pay for improved rural water provision if it isrnsupplied at an affordable price.rnTherefore, it may be pragmatic, both in terms of saving resourcesrnand sustaining the service, to put a price on safe water .