This study was conducted with the objective of assessing the status of rural water supply schemesrnand to id entify the chall enges and factors that affect rural water supply schemes ' performance in thernstudy area. The necessary data collected trom ten sample schemes in ten rural kebeles. The studyrnwas a cross sectional resea rch based on collecting information from 100 beneficiary householdsrn(selected randoml y) using household survey, ten focus group discussions conducted with eachrnscheme water commiltee, key informant interviews with WOWRD experts, di rect observation onrneach sample scheme and various secondary data (document review). The study revealed thernfollowing results. First, in many areas the approach used to implement rural water supply programrnwas found to be supply dri ven. The idea of provision of improved water supply in many areas didrnnot come from the community rather from experts. Second, community participation was restrictedrnto labori ous acti vities. The beneficiari es' invo lvement in requesting their demand, selecting type ofrnscheme and location of scheme etc was very limited. Particularly women participation is foundrnin significant, in all water committees women's position is in sanitation aspect which is notrninfluential in decision making. Third, the community management was found to be unsuccessfu l.rnThe assumption that the users can manage their scheme by collecting money for maintenance, guardrnand other management costs was not successful. In seven schemes (70%) there was no any waterrnfee/contri bution and in all the schemes ( 100%) the communi ty cannot maintain even simplernbreakages. Fourth, institutiona l capacity and support was found to be very weak. The capacity of thernWOWRD was below the expected particularly in man power, logistics and recurrent budget. Inrnaddition to this the office focu sed on constructing new schemes, overlooking sustainabi lity ofrncompleted schemes. The office was found very weak in strengthening water committees, organizi ngrnand mobili zing the communi ty etc. Fifth, as a result of the above problems the status of ru ral waterrnsupply schemes in the study area was fo und in a very dangerous condition. Many schemes are notrnperforming as expected; the pipes and structures are broken and damaged with in short period ofrntime more over many schemes are becoming unprotected water source that provide unsafe andrninadequate water to the target community. Therefore the findings call for adopting demand drivenrnapproach, improv ing community participation in all phases, bui lding community capacity to operaternand maintain the schemes and capacitating the WOWRD in all rounds are crucial