The perssting problem facing microfinance institutions is how to attain financialrnsustainability. Several studies have been conducted to determine and identify the factorsrnaffecting financial sustainability of microfinance institutions using large and well developedrnMFls in various countries. However, there is no enough research done in Ethiopian MFrnindustry where majority of MFls are small. Consequently, the factors affecting theirrnfinancial sustainability are not clearly known. This study, therefore, was set to bridge thisrnknowledge gap.rnThis study used [applied] a quantitative research approach using panel data regression as thernmain data analysis technique. The study was based on six years secondary data for 12rnsampled MFls obtained from: AEMFI; NBE; and Mixmarket. We found that microfinancerninterest rates charged, average loan size, cost per borrower, MFI age, MFI size, number ofrnborrowers, yield on gross loan portfolio, level of portfolio at risk, write-off ratio, liquidityrnlevel , staff productivity, and the operating efficiency affect the financial sustainability ofrnmicrofinance institutions in Ethiopia.rnThe study makes the following key contributions to knowledge in addition to identifyingrnfactors affecting fi nancial sustainability of microfinance in stitutions in Ethiopia: First, thernstudy reveals that the non-existence of trade-off between financial sustain abi lity and breadthrnof outreach. Second, consistent with the instiutionists ' view, the study provides empiricalrnevidence that financial sustainability of microfinance institutions improves their breadth of rnoutreach.