In recent years, there has been a substantial number of projects conducted in the construction industry of Bahir Dar area. Due to the size and complexity of projects, main contractors have resorted to subcontractors to share responsibilities and mitigate project risks. Subcontractors accomplish construction activities such as plastering, painting, carpentry, electrical installation, plumbing, metal work and HCB work. Since this collaboration is rather newer to the construction industry, this study aims study on the relationship between main contractors and sub-contractors in public building construction projects in Bahir Dar city. The study examines the selection system of subcontractors by main contractors and analyses the relationship in terms of contractual relationship, challenges faced and productivity improvement. The study utilizes semistructured interviews and questionnaire surveys as data collection techniques. Sample population is collected from Building Contractors and General Contractors (BC/GC) of grades ranging from 1 to 3, while the grade of subcontractors is not restricted. A relative importance index (RII) was used to decide the ranking of the results of the study. The result was analyzed using Statistical Package for the Social Sciences (SPSS) version 20 software and Microsoft Excel 2016. Based on the findings, it is identified that main contractors select suitable subcontractors based on “Commitment to quality standards, specialty in certain types of work, long-term relationship and good reputation”. The most interface problem between the two parties is late progress payment made to subcontractors; late delivery of construction materials by main contractors and delay of the works behind the time schedule by subcontractor. It is therefore recommended that, to improve their relationship between main contractors and subcontractors contract can be complete and clear, trust between the parties, and main contractors select their subcontractors properly with preset criteria and prepare subcontractor document with precaution, while subcontractors need to improve the quality of their works and meet schedules.