To deal with the rapid urbanization the government of Ethiopia has been enacting regulations that rnmainly focused on restricting informal land transaction. Sululta, is one of the eight towns in Oromia rnSpecial Zone which was established in 2008 to restrict the fierce sprawl of Addis Ababa. Unlike all of rnthese actions, the situation worsened and made the market to be dominantly informal and created bad rnmorphological growths in the town. By observing the problem, this study has conducted to explain the rnmajor causes and the consequences of the market failure in Sululta town. Research approach of rnexplanatory with survey methods were used in the research. Descriptive statics and analysis with rndetailed contextual reviews were widely undertaken throughout the research. The result of the study rnshows that, the major causes of the market failure includes: the inappropriate dominance of some of rnthe actors; the unbalanced socio-economic characteristics of the actors and the illicit nature of the rnmarket actors; the poor performance of urban land management system and the ineffective land rnpolicies. Accordingly, the result of the explanation of the consequences of the failed urban land market rnincludes: the rise of land price; rapid rate of urbanization; unsuitable settlement patterns; huge rnconsumption of the natural environment and difficulty to implement urban plans are the major effects rnthat are challenging the town. Finally the research recommends the reconsideration of the modalities rnof land provision with a very effective land management system that can insures the property holding rnrights of the citizens in order to solve this wide spread tragedy.