As a continuous improvement tool for effective management, KAIZEN has been introduced inrnEthiopia in various sectors including small and micro enterprises in Addis Ababa Cityrnadministration. To what extent KAIZEN has been effectively implemented requires to berninvestigated to see the challenges of its implementation. The study aimed to assess thernpractices and challenges in the application of Kaizen at Yeka and Arada sub-city in the case ofrnmanufacturing small and micro enterprises in Addis Ababa City Administration. Thernresearcher used a descriptive research design with a mixed approach. Data was collected fromrn32 enterprise owners through questionnaires and from 13 key informants using semi-structuredrninterviews. A total of 45 sample respondents were involved in the study selected throughrnpurposive sampling (Purposive sampling is useful in these instances because it provides arnwide range of non-probability sampling techniques for the researcher to draw on) and simplernrandom sampling (Simple random sampling is the basic sampling technique where we select arngroup of sample for study from 324 SMEs. Each enterprise is chosen entirely by chance andrneach member of the enterprise has an equal chance of being included in the sample to selectrnthe study areas and sampling respondents respectively. The quantitative data were analyzedrnthrough descriptive statistics, (percentage, mean and standard deviation) using SPSS Versionrn24. The findings indicated that there were challenges which derived from various sources, likerngaps in knowledge of enterprise owners and their negative attitude towards the kaizenrnimplementation and gaps in the capacity and capabilities of the management body. Regardingrnstakeholders; poor follow up by TVET deans, SMEs officials and AAKI institution werernobserved. The majority of the respondents elicited that the training the feedback they werernprovided on kaizen implementation was not sufficient and encouraging for the smoothrnoperation of Kaizen. It is recommended that concerning bodies should work together tornimplement kaizen as a strategy and giving continuous training, feedback and follow-up forrnboth enterprise owners and kaizen operators to make the KAIZEN system implementedrneffectively.rnKeywords: Challenges, waste elimination, Kaizen, 5Ss, stakeholders