The Kyoto Protocol has been in effect since 2005 providing flexible mechanismsrnto combat climate change and its negative effects. The CDM, one of the flexiblernmechanisms in the Kyoto Protocol, has the objectives of GHG emissionsrnreduction and promoting sustainable development in Non Annex I countriesrnthat host the projects. While the former is relatively easy to monitor andrnachieve; the later objective is facing difficulties because of the CDM's ownrnmarket based arrangement. The primary purpose of this work is to explore therncontribution of CDM projects to sustainable development using the HumbornAssisted Natural Regeneration carbon sequestration project as a case study. Tornachieve this objective selected sustainable development indicators are usedrnthat fall in to three broad environmental, economic and social categoriesrnallowing a multi dimensional assessment of the project's contribution tornsustainable development in the area. A four-point Likert scale questionnaire isrnused to collect data about sustainable development contribution of the projectrnwith a 0.85 level of Cronbach's alpha coefficient. The sampling unit was drawnrnfrom 100 households participating in the project in addition to data collectedrnfrom other stakeholders through key informant interviews. The Mann WhitneyrnU test is also used to compare the two sample groups with the 0.05 p level as arndividing mark to decide significance. The overall result of the study indicatesrnthat the Humbo carbon sequestration project, unlike most similar projects inrnother developing countries around the world, is promoting sustainablerndevelopment with socio-economic and environmental benefits to the localrncommunity even though there are issues that still need to be attended to. Thisrnwork also highlights Ethiopia's potentials and challenges in exploiting thernopportunity the climate change regime has to offer. Hence, clarifying andrnmain streaming the issues surrounding CDM and sustainable development inrnthe Ethiopian context are found to be of great importance. Finally, the studyrnrecommends what has to be done in the future to scale-up carbon tradernprojects to maximize their benefit.