Applicability of good governance in urban land administration is an essential tool for curtaining public outcry or grievance on urban land administration. In addition, it is crucial for sustainable development of a nation as land is the ultimate resource of human beings more over others, especially urban land since shortage of land is occurred in urban areas in more time. Government in Ethiopia especially after the coming of EPRDF is becoming the only service provider and the owner of the land, due to that, the efficiency of land related services has been questionable with various hindrances especially, in urban areas including our study area, Shahura. With this assumption, this research aims to assess the challenges of good governance in urban land administration from the perceptions of selected principles of good governance in Shahura City Administration. Mixed research approach was employed to achieve the objectives of this research. Both primary and secondary data sources were used to have the necessary research data. The primary data were collected through questionnaire, interview and personal observation whereas secondary data were gathered from various literatures and documents. Shahura city is used as a case and due to this, Case study research design has used to get full understanding of the challenges of good governance in Shahura city, which had illustrated by tables, figures and percentages. The study found out that unattractive structure of the compound, weak administrative capacity, corruption, lack of trained and committed experts, unpleasant customer handling practice and lack of proper documentation and recording system due to unable to use modern technology, luck of institutional arrangements to expose bad governance and promote good governance to provide appropriate services to the customers. The administrative capacity and organizational setup with its expert’s commitment in the organization created so bureaucratic and corrupted service delivery process and requires improvement in terms of resource allocation, reorganization, continuous capacity development and periodic evaluation to practically apply principles of good governance in urban land governance. The paper recommends on the need to coordinate employees with the customers, employees each other and other concerning body, strengthen evaluating and controlling mechanisms and work to improve practices of principles of good governances.