Recently, in Bahir Dar City, informal land transactions show an increasing expansion and trigger wider socio-economic and environmental challenges in the sustainable development of the City. Informality in land issues usually related to informal settlements that focus on the land development processes. Nonetheless, the mechanisms and processes of informal land transactions guiding the land transfer were relatively ignored and inadequately understood. Hence, based on the case of Bahir Dar City, this research explains the nature of informal land transactions in terms of its rule-structuring processes, the role of actors in the transaction, and the factors for its emergence and continued proliferation. To this effect, empirical evidence collected through interviewing research participants and other sources was analyzed. Accordingly, the study reveals that the government`s formal urban land allocation system (lease system) is ill-informed of the interest and reality of the majority of the urban dwellers thus unable to meet the demand for urban land. And informal land transactions are a response to the failures of the formal land allocation and land administration systems. The dominance and success of informal land transactions in the City are mainly attributable to its linkage with the formal system through rampant corruption practices in the land administration by which informal land rights get legal services related to land registration, surveying, property valuation, and other formal services. Besides, their user-friendly characteristics that provided adaptive and responsive alternatives for the majority of urban dwellers to access urban land proved the success of the informal channel. Moreover, high monthly housing rent and unwarranted restrictions imposed on tenants use right coupled with low eviction rates have aggravated urban dwellers to seek shelter through informal channels. Hence, there is a need to make a policy shift from urban land access control to urban land use and planning control and consider generous land accessibility and affordability for the masses. The government should also re-enforce its effort on sustainable residential housing construction and allocation as a matter of priority. It is by so doing coupled with other measures that informal land and housing markets are likely to become less attractive. Keywords: Access to Urban Land, Informal Land Transactions, Bahir Dar, Ethiopia