This paper analyzes determinates of households willingness to pay for improved water Service, using thernContingent Valuation Method (CVM). The study used cross sectional data collected from 250 householdsrnliving in different areas of Addis Ababa, Ethiopia through single bounded elicitation format with an openrnended follow up question using a face-To face interview. The empirical models adopted byrndetermine factors influencing households' decisions to connect to the pipe water scheme are probate andrnto bit models.rnresults of the study revealed that respondents' WTP is affected by a number of explanatory variablesrnincluding sanitation facility, Water related disease and socio -Economic variables like income, Age, Sex,rnmarital status, Education level and family size of the respondent etc. The mean WTP for private ConnectionrnIs found 20 cents per bald and 15.79 cents per bald from closed ended and open-ended questionrnrespectively, Which are well above the current subsidized tariff.rnthe following policy implications are derived from the study. First, The positive and significant relationrnbetween sanitation facility and WTP implies that improving sanitation service could not be done alone ratherrnit has to go hand in hand with improvements in piped water supply provision. Finally, The revenue andrnhouseholds' Welfare gain in changing the existing policy (low trail with limited unreliable private service andrnhence low level equilibrium) to a new (higher tariff with more and improved private connections) can bernhuge.