Nowadays, NGOs increasingly play a prominent role in the development sector by fillingrngaps the developing world face. The study emphasizes on the assessment of practice andrnchallenges of monitoring and evaluation in local NGOâ€™s within Addis Ababa, Ethiopia. i.e.rncase of local NGOs working on health projects under the USAID local capacity developmentrnproject. The purpose of this research is to asses this practice and challenges. The populationrnof this research is the 288 local NGOs operating within Addis Ababa, Ethiopia while therntarget population is 50 NGOs that are registered and operational under the USAID localrncapacity development program implementing health projects. A questioner is distributed tornall 50 local NGOs. Finally, 34 respondents filled in and returned the questioner properly.rnThis research employs descriptive research design for acquisition of quantitative data. Therndata is analysed using SPSS and interpreted in percentage, and frequency. The findings ofrnthis study reveal that: a large majority of the subjects (94.1%) confirm encounteredrnchallenges such as policy/legal framework, inadequate baseline data, lack of fund andrndeficiency of expertise to monitor and evaluate projects effectively. They adopt mechanismsrnsuch as introducing participatory M&E approach, relocating budget for M&E and limitingrnM&E activities to mitigate the challenge. This study in general shows that although localrnNGOs have good M&E practice they also face numerous challenges when implementingrnM&E. The implications of the study and relevant recommendations is forwarded in this study.