There has been increased interest in the implementation of the Kaizen management philosophy for industrial development in Ethiopia. Accordingly, this study aimed to investigate the mediation effect of employee participation in teamwork in the relationship between management commitment and economic outcome of Kaizen in the manufacturing industry of Ethiopia. To realize these objective primary data was collected via questionnaire from 202 respondents in 26 manufacturing industries from textile, agro-processing, chemical and metal, and engineering sub-sectors. To analyze the data ANOVA, correlation, and Structural Equation Modeling (SEM) were employed using SPSS and AMOS software, version 23, to perform the test of difference, association, and cause and effect relationship respectively. The finding of the study indicated that the mean value of employee participation in teamwork, management commitment, and economic outcome of Kaizen implementation were 3.42, 2.45, and 2.62, respectively. The study finding also indicated that the mean economic outcome of Kaizen implementation, management commitment, and employee participation in teamwork had statistically significant differences at a 0.1% level of significance on the four sub-sectors. The SEM result indicated that management commitment had a direct negative effect on the economic outcome of Kaizen implementation and had a direct positive effect on employee participation in teamwork, which was statistically significant at 0.1% level of significance. As well, employee participation in teamwork had a direct positive effect on the economic outcome of Kaizen implementation, which was statistically significant at 0.1% level of significance. In addition, management commitment had a statistically significant positive indirect effect on the economic outcome of Kaizen when the mediator variable, employee participation in teamwork introduced. Overall, the findings from this study implies that management commitment for Kaizen implementation only brings economic outcomes by promoting employee participation in teamwork. Therefore, manufacturing industries should enhance their management commitment focusing on promoting employee participation in teamwork to realize the economic outcome of Kaizen.