The central part of Addis Ababa in characterized by the predominance ofrnunplanned neighborhoods and slums. These inner city areas are predominantlyrnoccupied by low income households since most of the economic and public activitiesrnare located in the inner city that provides a multitude of formal and informal incomernearning opportunities. Since May 1991 the country has been introduced to a freernmarket economic system and this new policy environment resulted in the private realrnestate developers becoming involved in urban development activities. At present morernthan 400 project proposals have been submitted to the Local Government requiringrninner city land to redevelop for other purposes in accordance with the 1984 MasterrnPlan. As a result, a sUbstantial number of inner city residents have been displacedrnand more are expected to be displaced in the near future. Therefore this thesisrnexamines the consequences of such urban development on the livelihood of the innerrncity slum dwellers taking a case study of the Sheraton Addis Hotel Project.rnThe sample size consisted of 86 relocated households (12%) drawn from a totalrnpopulation of 718. The sample households were selected randomly and proportionallyrnfrom the housing units stratified into different housing types.rnThe findings of the study indicated that the resettlement scheme has resulted inrnproviding decent housing units among which 99% of the households were highlyrnsatisfied. It was also identified that there was a significant improvement in toilet, andrnkitchen facilities. However, the public facilities and the infrastructure provided in thernnew site lagged far behind. The study demonstrated that the resettlement scheme hasrnresulted in a dramatic increase in the unemployment rate from 1.2 percent in thernprevious settlement to 11 .1 percent in the new site. Among the factors that broughtrnabout this change lack of potential clients and markets was the major one. In additionrnto this the study revealed that the partial resettlement scheme led to problems inrnsocial integration manifested in the breakup of former neighborhood ties. Thernlocational preference of the relocatees was raised and it was identified that theirrnpreference depends upon the type of employment and location of working place.rnHence among those who were involved in temporary and casual work 73 percentrnpreferred to live in the inner city. Among those who were permanent full-time workersrnonly 50 percent would prefer to go back to the inner city. The disadvantages of movingrnfrom the inner city were the increase in transport costs, disruption of formerrnneighborhood ties and the reduction of monthly income of some household heads.rnThe study also demonstrated that the majority of the households have remained in thernresettlement area by overcoming the problems resulting from the resettlementrnscheme.