Dispute settlement is usually considered as an important issue in investment andrncommercial transactions for disputes are unavoidable. In the modern era, court litigationrnwas considered to be the main and inherent dispute reso lution mechanisms including forrncommercial and investment disputes. Unlike the needs of commercial and investmentrndisputes, however; Court litigation is generally characterized by, among others, costrnineffic iency, adversarial nature and delay. Consequently, modern alternative disputernsettlement mechanisms are becoming more popular in resolving commercial andrninvestment disputes. The primary choice for commercial and investment disputes hasrnbeen modern arbitration. But, modern arbitration is also becoming more adversarial,rncostly and lengthy. Therefore, more flexible interest based ADR mechanisms likernmediation is becoming more important to resolve investment and commercial disputes.rnIn Eth iopia, resolving disputes using traditional mediation is common throughout therncountry. But, Modern & institutionalized mediation is very recent and rare. There is alsornno legal regime specifically governing modern & institutional mediation in the country.rnEven if we can take mediation and conciliation to mean a similar concept, legal rulesrngoverning conciliation are insufficient. However, few ADR centers like the Addis AbabarnChamber of Commerce and Sectorial Association arb itration institute and Court annexedrnmediation Center at federal courts are rendering mediation services.rnUsing both qualitative & quantitative methodologies as well as primary & secondaryrndata, the research examines modern and institutional mediation in Eth iop ia and the needsrnto further modernizel and institutionalize it to reso lve commercial and investmentrndisputes. By analyzing primary & secondary data and using logical reasoning, thernresearch recommends, among others, the need to reconsider the policy towards modernrnand institutionalize mediation on the side of the government, undertaking various legalrnreforms, strengthening and expanding existing court annexed mediation centers,rnincreasing accessibility of chamber mediation in the country, considering establishmentrnof new mediation centers and the need to consider estab lishing a regional mediationrncenter in Addis Ababa.