Informal sector activities are prevalent in urban areas of Ethiopia, contributing significantly to the economy but often operating outside formal legal frameworks. Qualitative research methods were employed through interviews with key stakeholders, including government officials, civil society organizations, and informal sector entrepreneurs. Data was analysed using thematic content analysis. The legal framework is fragmented across different sectors and lacks comprehensive coverage of the urban informal economy, resulting in inconsistent support for businesses operating informally. While existing laws provide some guidance, they are insufficient to fully address the unique challenges faced by the urban informal sector in Ethiopia. The government should develop a cohesive legal framework that specifically addresses the needs of the urban informal sector and ensure its enforcement across all relevant sectors.