Th is stlldy lras conducted in Merkato, Addis Ababa lI'ith th e oilll of a,sessin g the majorrncha ll enges al1ll pro.lpeC IS of women in the inf'orlllal bllsiness sector. Th e informal secto rrn1}I'()1'ides lIlore than half of the emploYlllent opportllll ity in IIriJan areas of Ethi opia. ThernseC/o r plays an important role in absorbing s /II pllls labor and help women ge neratingrnincome. Despite ouch contributions, th e inf'ormal ,ector is ,aid to face challengesrnspecifically for women operators in th e developing world. So me of the major problemsrninclllde: la ck of wo rking capita l, poor working environment, lack of acce,s to credit andrntr a iningj{lcilities. In fact, the challenges womenface in the informal ,ectors are not velYrnwell studied in th e context of Addis Ababa. A case study approach was employed. Bothrnprilllw y and secondary da ta were collec ted through questionnaire, interview andrnobservat ion. A sample of 80 r espondents was taken Fom women informal operators inrnMerkato area. In addition, key informants were considered Fom Woreda Trade andrnIndllstry Office, and women 's Affair Office. The data were a nalyzed by using bothrnqualitative and quantitative methods. The findings of th e study show that, pOOr workin grncondition, shortage of working capital, lack of access to credit , lack of business skill/rntraining, sho rtage of raw materials, lack of inji-astru cture and service j{lcilities andrnpolice harassment are th e major challenges women face in th e study ar ea. In f act,rnfindings suggest th at informal secto rs are serving as important safety nets for th e poorrnand marg inalized women who do not get e mployment opportunities in the for mal sector.rnHen ce future interventions may consider as to how to transform informal business intornlegal ones so that women can get access to credit facilities (from financial institutions)rnand training (that can them impro ve th ei r business skills), In this re ga rd, es tablishingrnthem into micro and small enterprises IVould play a great role in providing otherrnnecessary facilities sa as to change the living standard of informal operators, espec iallyrnwomen.