This paper investigates the determinants and dynamics of poverty in urban areas in Ethiopia. The results show that urban poverty is quite high in Ethiopia, indicating the Seriousness of the problem. We observed high fluctuations in living standards mainly Driven by fluctuations in food prices, particularly those of cereals. Thus, price Stabilization policies form important ingredients for fighting poverty. Factors that affect the dynamics of poverty are mainly education of head of the household and size of the household. Policies that promote human capital and control of population growth reduce greatly the probability of falling into poverty.