Informal sector businesses play a significant role in urban economies across Africa, particularly in Ethiopia where formal sector structures often lack coverage. A mixed-methods approach combining qualitative interviews with quantitative data analysis of business surveys conducted in selected urban areas of Addis Ababa, Ethiopia. The analysis reveals that approximately 45% of urban businesses operate informally, with a notable proportion experiencing rapid growth during the study period (-). While formal sector regulations provide some benefits to large enterprises, informal sector businesses often face barriers such as lack of access to finance and legal protections. Policy recommendations include enhancing financial inclusion programmes for informal sector entrepreneurs and simplifying bureaucratic procedures to reduce operational costs. Informal Sector, Urban Businesses, Ethiopia, Economic Dynamics