Agro-fuels investment in Ethiopia is a recent phenomenon initiated not only as arnresponse for the current increasing energlj demand, but also to decrease the expense forrnpetroleum import and as a potential of job creation for the local economies thereby as arnmeans to income generations particularly where labour intensive feedstock can bernutilized. Hence, the countnj designed a strateglj for developing alternative energlj sourcernand allowed inventors to produce agro-fuel from which Flora Eco-Power is one. Thernstudy was conducted to assess the impact of the agro-fuel investment of the Flora EcoPowerrnproject on the livelihoods of the local communihj in Midhega Tolla woreda. Datarnwere collected from 200 randomly selected farmers through structured interviewrnquestionnaire. Focus group discussions and key informants interviews were also used asrntechniques of data collection. Descriptive statistics such as mean, percentages, and t-testsrnwere used to analyze the data. The study identified that the Flora Eco-Power project hasrnnegatively affected the crop and livestock production in the study area due to the fact thatrncastor bean production competed the farm and grazing lands. As far as employment isrnconcerned it has created job opportunities to the local people which slightly helped themrnto cope up the recurrent drought which is common in the study area. The study alsornindicated that the project did not bring a positive impact on basic social services of thernstudy communihj which projects are expected to do so. The overall positive impact of thernFlora Eco-power castor bean production project is minimal and fanners in the study arearnare facing economic loss due to the low price of the castor bean fixed by the Company. Thernresults suggest that pOliClj aimed to accelerate agro-fuel development in the study arearncould be successful and to ripe the benefits from the agro-fuel investments, if the keyrnstakeholders in general and the local communihj in particular participate actively in allrnaspects