The purpose of this study was to investigate the major psychosocial problems ofrndevelopment induced-displaced persons in Addis Ababa with a specific emphasis on displaced persons who exiled from the Arada sub - city, “Dejache Wube villageâ€. To do this, a descriptive in its nature which contains comparative survey and correlational studies was used for the study and quantitative approach was employed, to gather the data from householders who originated from Arada sub-city, “Dejache Wube village†and later relocated in “Gelane,†“Tefo Meberate hayeleâ€, “Jemo†condominiums and kebele house sites in Addis Ababa, Ethiopia. First, the researcher made a tour of the study area, then the researcher collected the necessary data from displaced persons by using questionnaire; forty (40) displaced persons have participated in the research to get the essential data. The findings of the study revealed that displaced persons are suffering from social problems in their new residential areas that compare with their previous home, such social problems as, they did not get someone to talk about their problems in the new residential areas, don‟t feel comfortable while they are playing with their new neighbors, experiencing a sense of loneliness, they don‟t have confidence about their social dealings and they really miss their proximate friends. Besides, psychological problems such as depression, anxiety, stress, low self-esteem etc had also been their major problems. Following the findings and conclusions drawn, it is recommended that the government should be change the unfair compensation and rehabilitation policy and government should be provided adequate social and psychological support to displaced persons. It is also recommended that displaced persons should be provided within well integrated social networks in their new residential areas.