This paper analysis the levels of total factor productivity and competitiveness ofrnEthiopian textile and garment industries in sight from medium and large scale firms overrnthe period 2001-2005. In this regard, textile and garment sub-sector plays an importantrnrole in industrialization and economic development. Despite its importance forrnindustrialization, the Ethiopian textile and garment sub-sector has not shownrnencouraging sign both in terms of productivity and competitiveness. Hence, the generalrnobjective of this study aimed at analyzing the level of total factor productivity andrncompetitiveness of Ethiopian textile and garment sub-se::tor using secondary data fromrncentral statistical agency of Ethiopia which covers five years period. The studyrnconsidered 17 textile and 8 garment sample firms.rnIn the analysis, the study employed stochastic frontier production function model and unitrncost ratio method. The study made use of a computer program frontier version 4.1c andrnstata version 9 as a tool for analysis. The results of the analysis revealed that the level ofrntotal factor productivity and competitiveness capacity of the sub-sector is not good. Onrnaverage, technical progress, technical efficiency and Scale efficiency (economies of scale)rndeclined by -34%, -25% and -1.3% per annum over the study period, respectively. Thernnegative change of these efficiencies resulted in negative total factor productivity growth.rnSO, the contribution of total factor productivity to output growth is found -60.3% perrnannum. With regard to competitive capacity, all the four digit groups of manufacturingrnactivities in the sub-sector prove to be uncompetitive even in the domestic market.rnFrom this analysis, therefore, it would be probably drain that the growth of the subsectorrnis pulled back by total fac tor productivity gro11" 17 & failed to compete both inrndomestic and international market as a result of increasing trends in technical regress,rntechnical and scale inefficiencies as we:! as cost ineffectiveness. This is, perhaps, arnreflection of firm level weakness with mediocre product ct design, use of backwardrnmachineries, limited international exposure and passive inaction to competitive products.rnThus, textile and garment firms ought to family work in addressing their weakness andrnadjust themselves with the challenges of the changing global environment. Governmentrnshould also play its supportive role in terms of ensuring fairly competitive domesticrnmarket, providing market and technology intonation, supporting trainings andrnminimizing transaction costs related to the provision of its services.