One of the wide-ranging problems in Ethiopia that the construction industry is facing is the price escalation of construction inputs. This major problem is spread all over the country and domestic contractors are critically affected. Moreover, the projects‟ performances are also affected by time, cost and quality. The aim of this research is to study the causes and impacts of price escalation and its improvement mechanisms in road constructions in south nation nationalities and people region. The study concepts are developed through a literature survey that enables to find out the variables. Questionnaire based studies and desk studies are used to assess the problem. The data required for this study were collected through self-administered open and close ended questionnaires, desk studies/archival records (three in number) and unstructured interviews. The statistical method of Relative Importance Index and Spearman’s correlation coefficient were used to analyze the collected data through questionnaires. Based on the finding’s variables were ranked according to their maximum value of relative important index output. In addition, the respondent’s correlation in ranking variables was studied in order to identify the agreements between respondents. This research studied the causes of price escalation in the specified projects, South Nation Nationality and people regions road construction projects of Ethiopia, and conclude that the six groups that affect the price escalation are: Project level (Weather conditions, Project location Ground Condition, Supervisory level (availability of supervision, Time to await inspections/tests & Quality of supervision), activity level (inaccurate estimate , unrealistic schedule &Sequence of activities), Owner level (Time required to make a decision by owner, Number of change/extra work orders Competence/knowledge of owner), Laboure level (Subcontractors and suppliers, Quality of work (by subcontractors)&Availability of skilled labor) and Equipment and Material level Material quality, Equipment availability ,Suitability). This research work also has discovered that the top three major effects of price escalation are Project delay and Cancelation, loss of profit, higher project costs. It also discovered Current price escalation management methods and Price improvement mechanisms. Finally, based on the analysis of the results, recommendations have been proposed that enables to minimize the problems of price escalation and its improvement in south nations nationalities and people region federal road construction projects and favors the construction industry for better performances. Keywords: price escalation, price modification, road project, price improvement