Addis Ababa has potential for attracting touri sts because it's the center of internationalrnconferences and the city is the entry point for most of international tourists. Although the city hasrnalso much to offer, investment is not sufficient for upgrading its attractions and tourist servicernproviding institutions. The main purpose of this study is to present specifically a situation ofrntourism investment in Addis Ababa. The study has assessed challenges and opportunities ofrninvestment in tourism sector in the city. The design of the study is descriptive and has employedrnboth quantitative and qualitative research approaches. The researcher used instruments such asrninterview, questionnaire, focus group discussion and existing secondary sources for datarngathering. 128 questionnaires were distributed to investors selected from licensed star hotels andrntour operators. But only about 102 questionnaires were returned and analyzed. Interview has alsornbeen conducted with different governmental and non-governmental bodies found in AddisrnAbaba. The data was analyzed b)' triangulating both quantitative and qualitative method s. Thernfinding of the study shows many challenges and opportunities of tourism investment in AddisrnAbaba. The main challenges include bureaucratic problem, in sufficiency of basic infrastructures,rnlow promotion in the sector, macroeconomic instabi lity and problem of implementation capacity.rnAccording to this study general opportuilities of tourism investment include good attention ofrngovernment, large market size, and mixed market economy, existence of ample resources andrnavailability of trainable man power. The sectors of investment opportunities include publicrninfrastructures such as transportation, telecommunication, water supply, electricity etc and touristrninfrastrnctures such as hotels, restaurants, tour operation, conference centers, recreation centersrnetc. In general, even if the city has many opportunities of tourism investment, the pelformance ofrninvestment was found to be at low level.rnKey words: Tourism, Investment, Challenges, Opportunities, Addis Ababa