Groundwater is the water contained at the beneath the earth surface in rocks and soil. It is the water that accumulates in aquifers. The aim of this study is developing the water quality index of Dire Dawa Water Supply System (DDWSS). A total of 15 ground water samples were collected on November-December, 2020. Fifteen water quality parameters were tested. Statistical analysis of correlation were analyzed using statistical software and water quality index (WQI) of sampled groundwater analyzed using weighted arithmetic mean method. The study of result showed that, EC, TDS, TH, HCO3-, CaCo32-, Ca2+, Mg2+and NO3- water quality parameters were beyond the permissible limits of WHO standards. . However, pH, TUR, Fe, F-, Cl- and TC water quality parameters were within the standards at the time of sampling. From the statistical correlation analysis, water quality parameters like TDS, EC, TH, Ca2+ and Mg2+ are significantly correlated with correlation coefficient greater than 0.5. The WQI ranges from 73 to 114 From the WQI result classification 60% (n=9) of the samples good water quality and 40% (n=6) of the samples had poor water quality for drinking purpose. This result indicated that DDWSS had deteriorated water quality. Remedial action is mandatory to improve their water quality through improving sewerage systems, reducing level of nitrogen from the source, treatment for industrial effluents and solid waste before release to the environment.