Interest rate spread is a crucial indicator of the growth and improvement of an economy as there is a critical link between efficiency of banks financial intermediation and economic growth. Thus, the purpose of this study is to empirically examine the major determinants of interest rate spread of commercial banks in Ethiopia. To achieve this objective, the researcher used quantitative research approach and explanatory research design. The study used balanced panel data for eleven commercial banks in the period between 2009/10 and 2019/2020. The samples were selected using purposive sampling techniques from the total commercial banks of Ethiopia. Multiple regressions using the pooled OLS model were applied. The result of the panel regression model showed that except credit risk all variables included has significant effect on interest rate spread of commercial banks in Ethiopia over the study period. Operating cost, return on assets, and bank size has positive and significant effect on interest rate spread of commercial banks while capital adequacy, non-interest income, deposit market share and inflation has negative and significant effect on interest rate spread of commercial banks of Ethiopia. Even though, credit risk positively affects interest rate spread its effect was insignificant within the study period. Hence, the researcher suggests that the commercial banks of Ethiopia should reduce costs as much as possible to be efficient in the intermediation process and raise appropriate spread. At the regulatory level the study suggests the importance of ensuring and promoting favorable economic situations such as inflation rate.