According to a recent analysis of NASA, the year 2014 now ranks as the warmest on record since 1880. Africa is widely held to be highly vulnerable to future climate change related hazards, and Ethiopia is often cited as one of the most extreme examples. The country’s economy is highly exposed to climate variability and extremes and the nature of agriculture, primarily rain-fed is sensitive to fluctuations in rainfall, which forms the basis of the economy supporting roughly 42% GDP and 85% employment. Wahlström M (2009) reported that over the last two decades (1988-2007), 76% of all disaster events were hydrological, meteorological or climatological in nature. In this review, a great concern is given for extreme conditions (flood and drought) particularly climate change related hazards and tries to look at the challenges, mitigation and policies. Climate change, drought and flood will continue to be a primary concern for many Ethiopian and even agricultural production and water supplies will become more severely diminished. Starting from 1970-1996 droughts and the resulting food shortage have affected millions and cause for the death of a significant number of people and in 2009 Ethiopia has experienced a delay in the main rainy season, particularly in northeastern areas, resulting in 50-70 % of agricultural land being sown for cropping. Ethiopia has also experienced a major flood in 1988, 1993, 1994, 1995, 1996 and 2006 and climate change, including extreme events like drought and flood affected areas will likely become more widely spread. Recently, flash floods affected big cities, including Addis Ababa and Dire Dawa (death of 300 people) and result in considerable damage to lives, livelihoods and property. Despite the hugely damaging effect that natural and man-made disasters have on Ethiopia’s economic development, little is done to prevent them. There are significant challenges to reduce climate change related hazards, but linking of climate change adaptation with disaster risk reduction and effective strategies to prevent hazards from becoming disasters and managing those disasters that do occur would make a lasting contribution to the quality of life and sustainable livelihoods. Several factors contribute to Ethiopia’s high vulnerability to disasters, but here the authors will focus on institutional frameworks and policy. There are several NGO and governmental climate change actors in Ethiopia. The country’s National Policy on Disaster Prevention and Management (NPDPM) was prepared in 1993. Ethiopia has also ratified the United Nations Framework Convention on Climate Change (UNFCCC) and under the mechanism, a National Adaptation Program of Action (NAPA) was produced in 2001 with an ambition to identify ‘immediate and urgent’ adaptation activities that address current and anticipated adverse effects of climate change and extreme climate events. The Environmental policy of Ethiopia indicates that environmental sustainability to be recognized in policies and strategies as a key prerequisite. In line with this the Environmental Protection Agency (EPA), was established and mainly assumes a regulatory role and coordinates various activities and included policy on climate change and pollution, particularly on promoting climate monitoring programs as the country is sensitive to changes in climate, identifying a firm and demonstrable commitment to the principle of containing climate change and fostering to use hydro, geothermal and solar energy to minimize an emission of greenhouse gases.