Decentralization is believed to improve development activities by allowingrnlower levels of government bodies and the people at large to participate inrndevelopment planning and implementation. Of course, such participatoryrndevelopment through decentralization can be realized if important preconditionsrnsuch as political commitment, availability of and access to resources, capacity ofrnimplementing agencies and the like are adequately met. The on-going decentralization process in Ethiopia has introduced a majorrnchange in the political, economic and social systems of the country. The newrndecentralization process, effected since 1991, is organized under federal form ofrngovernment whereby the country has been divided into nine regional governmentsrnand one city administration under the umbrella of the Federal Government. Thernregions are delimited mainly based on historical, linguistic and ethnicrnconsiderations. This study is aimed at investigating the process of decentralization in therncountry. It is conducted mainly on a case study technique where one region,rnOromia Region, is randomly selected from among the regions in the country. Thernresearch provides a brief description of the conceptual framework ofrndecentralization, then the data collected and its analysis. Finally it presentsrnconclusions arrived at. Both quantitative and qualitative data collection methodsrnwere used. Interviews were conducted with 25 key informants-individualsrnassumed to have particular knowledge on the issue of decentralization. Grouprndiscussions and survey questionnaires with 14 participants were also included inrnthe research. Oromia Region is the largest of all in terms of territorial size andrnpopulation. It has a relatively strong institutional and manpower situation asrncompared to other regions. However, close scrutiny of regional activities revealsrnthat there is a lot to be done. Although authority and powers seem to berndecentralized, the extent of decentralization below regional levels, to the zonal,rnworeda and kebele levels is limited. Moreover, the decentralization process in thernOromia region is challenged by many problems such as low revenue basis, veryrnlow administrative and manpower capacity and poor inter-organizationalrnarrangements and relationships. There is a large vertical imbalance between the revenue raising powers andrnexpenditure responsibilities of the Oromia Region. Therefore, every year, morernthan 70 percent of the budget of the region is granted by the Federal Governmentrnin the form of unconditional subsidy. This means that in Ethiopia, expenditurernresponsibilities have tended to be centralized in favor of the Federal Government.