Tourism industry is known for its potential in generating employment opportunity andrnincome. Thus this study is conducted primarily to identify the social group that are benefitingrnfrom tourism activity in Bishoftu, and whether the net earnings from the employment in therntourism enterprises have anything to do with livelihood improvement of the local community.rnWith this in mind the study addresses the contribution and the performance of touristrnenterprises in generating employment and income in Bishoftu. Further, an effort is made tornfind out the major constraints for the development of tourism at national as well as Bishofturnlevel. Data were collected from both primary and secondary sources. Primary data wasrncollected using key informant interview and questionnaire by approaching key actors in therntourism industry in Bishoftu city. Thus, 80 sample populations were selected to fill thernquestionnaire. An interview was also held with 25 key informants. The study employedrndescriptive research design with combinations of qualitative and quantitative approaches.rnThe data were analyzed and the result of the analysis was presented in descriptive statisticsrnformats including frequency, tables, chart, graphs, percentages and ratios.The studyrnconcludes that tourist flow, income and employment generated from tourism is growingrnsteadily. Tourism is contributing a lot to the economic growth and unemployment reductionrnboth at national and Bishfotu level. Also tourism is improving the socio-economical life of thernlocal community of Bishoftu. In order to overcome the current challenges and hence exploitrntourismâ€™s potential to the fullest limit the researcher forwarded recommendations