The purpose of this study was to examine the impact of financial innovation on financial andrnoperational performance of commercial banks in Ethiopia. This research, studied innovations inrnthe area of mobile banking, internet banking and automated teller machines. These innovationsrnwere studied in relation to their effect on commercial banksâ€™ financial and operationalrnperformance. An explanatory design was used while a questionnaire was used to gather primaryrndata. The study conducted a census of all 17 commercial banks instead of adopting a samplingrnmethodology. The study sample in terms of the respondents covered purposively selected seniorrnmanagers and senior officers in head office and a sample of 220 was administered with thernquestionnaire and a 77.7% response rate was achieved. The data collected was analyzed withrnthe aid of descriptive statistical techniques such as frequencies, percentages and mean score.rnMore so, multiple linear regressions were used to establish the relationship between studyrnvariables and to test the hypotheses using Statistical Package of Social Sciences Version 22. Keyrnfindings from the study confirmed that, financial innovations influence performance ofrncommercial banks in Ethiopia positively. The adoption of innovations by commercial banks has arnhigher potential of improving operational performance than financial performance. Financialrninnovation has positive, strong and significant effect on operational performance. Each type ofrnbank innovation (mobile, internet and ATM banking) significantly and positively influenced bankrnoperational performance. On the other hand, financial innovation had showed positive but weakrnrelationship with financial performance. Mobile banking has a positive and statisticallyrnsignificant effect on the financial performance of commercial banks; whereas internet and ATMrnbanking had positive but insignificant effect on the financial performance of commercial bank.rnSome of positive but insignificant impact of variables (internet and ATM banking) on financialrnperformance may be due to an early stage, slow and low level of adoption of financial innovationrnin Ethiopia banking industry. Based on the findings of the study, it can be concluded that bankrninnovations influence performance of commercial banks in Ethiopia positively. Thus, the studyrnrecommend commercial banks in Ethiopia should invest and engage in financial innovation andrnexert more on awareness creation about financial innovation in order to boost their performancernand to compete in ever changing financial system.