Construction cost overrun is a major problem faced by the construction project in the world and it needs serious attention to improve. Many projects experience cost and thereby exceed initial contract amount. In Ethiopia, the number of projects is increasing from time to time. However, it becomes difficult to finish projects within the allocated cost and time. Taking under consideration the scarce financial resources of the country, cost is one among the main problems in Ethiopia. Cost overrun is a result of one or more grouping of several causes, which are very essential to identify for effective cost performance. Existing practices focusing on the identification of causes does not give the insight of underlying relationships between the causes. Hence, this study focused on studying the fundamental relationship between factors of cost overrun using Analysis of Moment Structure-SEM method. This is an advanced multivariate analysis procedure for estimating and analyzing causal relationships in path models. The main object of this study was to investigate the cause and effect of cost overrun of construction projects in case of government owned industry park construction projects. This research also prioritized the mitigation measure of cost overrun effect. Questionnaire survey has been conducted on a total of 158 respondents from client, contractors and consultant to model the cause factors of project cost overrun using Structural Equation Modeling (SEM) approach via Analysis of Moment Structure (AMOS v23) software package. To rank the Methods of Minimizing of cost overrun using Relative Importance Index (RII). In addition, a detailed archival document review was conducted to get the actual essence of cost overrun of the project. Both Exploratory Factor Analysis (EFA) and Confirmatory Factor Analysis (CFA) were used for data reduction and identification of factor structures and validate study results, respectively. Findings of the research shows that, Contractor Inefficiency are the most significant construct or group of factors causing cost overrun. Following Contractor Inefficiency, Improper Project Design are the second significant construct or group of factors causing affects cost overrun. Client Incompetence, An Ineffective Contract Management and Construction Material Related Problems are the third, fourth and fifth significant construct or group of factors causing affects cost overrun. xiii The Cost overrun method of mitigation in the Amhara Industry Park Development Corporation projects mainly minimized by Proper cost control/cost performance management. Hire and motivate experienced and qualified workforce to improve productivity and quality of workshops and Appropriate scope of definition were the second and third main method of mitigation of the Project Overruns. Keywords: Construction projects, Cost overrun, cause and effect, SEM.