Cyber crime is one of the most serious challenges confronting the global community, affecting socio-political and economic as well as security aspects worldwide. Its evolving, trans-national and complex nature has made it difficult to comprehend its meaning, nature, characteristics, and type. Because of these factors, prevention and investigation of cyber crime is not an easy task for law enforcement authorities worldwide. In Ethiopia, there is also a high level of computer crimes from in and out-side of the country and law enforcement authorities face hindrances in effectively investigating and preventing its commission, as well as achieve legislative goals. In this context, the study first aims to identify and examine the legal and practical challenges impeding the effectiveness of investigation and prevention of cyber crime in Ethiopia. The study also tries to assess the legal framework and the practice of cyber crime investigation and prevention in Ethiopia. To that end, the study used qualitative empirical and doctrinal research methodology. Most importantly, data was gathered through in-person interviews and questionnaires. The thesis discovered that cyber crime investigation and prevention is hampered by a number of legal and practical as well as institutional difficulties. These gaps or difficulties includes: Inadequate coverage of crimes, and laws on filtering and blocking mechanisms; Failure to be part of international legal initiatives; Limited capacity of law enforcements authorities; and, Absence of well-built inter-institutional collaboration; as well as insufficiency of up-to-date investigative tools and equipment. After all, the researcher concludes that the existing substantial loopholes in laws and technical and institutional encumbrances highly hampered the efficacy of cyber crime investigation and prevention in Ethiopia