The study has scrutinized intergovernmental fiscal transfer under Ethiopia fiscal federal ism frameworks by mainly emphasizing on sub-national government using descriptive study. The study employed interview and document review in order to collect primary and secondary data respectively. The study aimed to identifythe trends, performance, and constraints of inter governmental fiscal transfer at sub-national governments in Ethiopia. The study found, revenue and expenditure decentralization to sub-nationalgovernment in Ethiopia has resulted in severe vertical and horizontal fiscal imbalance. An average vertical fiscal imbalance in the country is about 60% while variation among regions ranges from 25%-91%.An average vertical fiscal imbalance among local governments is about 75% whereas the variation among localities ranges from 17%-94.1%. Vertical and horizontal fiscal imbalance in Ethiopia is mainly caused by difference in revenue generation capacity; assignment of unproductive and none buoyant revenue sources to sub-national governments; mismatch between revenue and expenditure decentralization; difference in expenditure needs; difference in economic and business activities and difference in natural resource endowment among sub-national government in Ethiopia.Although these problems are widely prevailing, the nation does not instituted appropriate and adequate legal framework or system to close vertical and horizontal fiscal imbalance. These problems resulted in more fiscally dependent and none autonomouslocal governments which may lead to poor local service provision and low accountability. The limitations are basic and require hasty action on such areas as revision of revenue and expenditure decentralization; inter governmental fiscal transfers design and revision of legal framework for intergovernmental fiscal transfer.These recommended policy directions is believed to have the potential to separate Ethiopia sub-national governments from its diverse and inherent fiscal problems.

KEYWORDS: Fiscal Transfer, Fiscal Decentralization, Sub-national Governments, Local Governments.