This study examines the effect of electronic banking on profitability of commercial bank of Ethiopia; electronic banking has increasingly become an inevitable tool of banking business strategy and a strong catalyst for economic development. Data collected with a structured questionnaire was analysis by descriptive statistics and the hypothesis formulated was tested using chi-square test. The study found that there is a significant relationship between electronic banking and banks profitability. Also that E-banking has become popular because of its convenience and flexibility, and transaction related benefits like speed, efficiency and accessibility. Electronic banking refers to the provision of retail and small value banking products and services through electronic channels. The rapidly growing information and communication technology is knocking the front-door of every organization in the world, where Ethiopian banks would never be exceptional. The appearance of electronic banking in Ethiopia goes back to the late 2001, when the largest state owned, Commercial Bank of Ethiopia (CBE) introduced ATM to deliver service to the local users. Through reducing bank costs, electronic banking can increase bank incomes. In this research the effect of electronic banking (i.e. automated teller machines, pos, internet banking, mobile banking, size of the bank) in increasing profitability of Commercial Bank of Ethiopia is studied. The population of this research is the CBE’s Amhara region Branches. The research sample size was estimated 102. The research data was gathered through financial statements, data sheets, and questionnaire. The gathered data was analyzed through descriptive statistics (i.e. diagrams and frequency distribution tables) and inferential statistics (i.e. ANOVA test, T test, multiple regressions). According to the findings of the study; E banking services of CBE has positive impact on reducing transaction processing errors, saving time, reducing risk of caring cashes, and improving operational reliability of the bank. While the study reveals that there is relatively lower importance to attraction of new customers to the bank, reduction of human resource requirements of the bank, improvement of customers’ loyalty to the bank. The empirical analysis shows there is a positive relationship between electronic banking and its five components (i.e. automated teller machines, pos, internet banking, mobile banking, size of the bank) with bank profitability.