The objective of this paper is to review the major challenges and opportunities dairy production in Ethiopia. The dairy sector in Ethiopia can also be categorized based on land holding size, market orientation, scale, and farming system four major production systems namely: pastoral dairy production, small holder highland mixed dairy production system, urban and peri urban dairy production systems. The pastoral and small holder highland mixed farming systems of dairy production produce 98% percent of the total national milk production. This sector is largely dependent on indigenous breeds of low-productivity cattle, which produce not more than 1.5 liters per day on average. However, emerging of exotic breeds to improve the milk production performance of local cows was started in urban and peri urban dairy production of the country. Generally the low productivity of local breeds, shortage of feed, limited veterinary services and insufficient extension and training services, management and poor marketing infra structure are some of the major constraints of the dairy industry in the country. With the opportunities of diverse genetic resources and production system, the increasing access to service and inputs, demand consumption of dairy products and indigenous knowledge in the area of livestock production and processing.

Keywords: Key Words: Challenges, opportunities, dairy production