In this contemporary world, urban expansion is a common phenomenon in both developed andrndeveloping countries. In developed countries, it is associated with economic advancement andrnurbancentres are seen as engine of growth enhancing rural development by creating market forrnagricultural products and providing agricultural inputs for more productivity. However, inrndeveloping countries both the causes and consequences of urban expansion are mixed involvingrnboth positive and negative aspects. Ethiopia, being one of the developing countries, is notrnexceptional to the urban expansion phenomena occurred in other developing countries. Thernmajor factors contributing for rapid urban expansion in Ethiopia are higher natural populationrngrowth, rural to urban migration and spatial urban development. Bishoftu Town is one of thernmost expanding Towns in the country. It has geographic coverage of 3280 hectares in 1984; itrngrew to 4520 hectares in 2005 and currently it occupies 9511 hectares of spatial coverage. Thisrnstudy aimed at examining the expansion of Bishoftu Town and overall consequences onrnneighboring farmers, particularly on displaced farmers. This study has employed case studyrnmethod backed by tools such as open-ended interview guided questionnaires, semi-structuredrninterviews, and focus group discussions. There were 1480 displaced farmers since 2005 fromrnwhich the sample size of 1 48 (10 percent) was taken. Since the dislocated farming community arernsparsely populated, the researcher has employed snow-ball sampling technique for its ability tornaddress the respondents by creating network. The result of the study indicated that urbanrnexpansion program around Bishoftu was not participatory, people were not given awareness,rnand the dislocated households did not have opportunity to bargain in the determination of thernamount and kinds of compensation and calculating the value of assets. The compensationrnpackage provided so far did not capacitate the dislocated farming community around the TownrnThe study reveals that, the community were not given technical training and other advisoryrnservices and as a result consuming the money paid the farmers are falling into poverty. Urbanrnexpansion, displacement and compensation program that may be proposed in the future needs tornadequately aware and involve the community and compensation should be revised both in kindrnand amount involving skill development and other training and follow up after dislocation