The purpose of this research was to assess the potentials, opportunities and challenges of health tourism development based on traditional medicines in Bahir Dar city, Amhara, Ethiopia. The study applied a descriptive research design with a mixed research approach. The target populations were traditional medicine practitioners, tour guide association experts, culture and tourism experts, health experts, academicians, Ethiopian Food and Drug Authority experts, and biodiversity and environmental conservation experts. From those target populations, a total of 75 respondents from which 73 were valid for the analysis and 18 key informants for interviews were taken by using census and purposive sampling techniques, respectively. Both primary data sources, such as interviews, questionnaires, observation and secondary data sources, such as books, articles, journals, and reports, were used to accomplish the study. The results of the study revealed that traditional medicines have high authenticity, healing ability, nature-based origin, and plurality potentials for health tourism development. The study also proved the availability of suitable environment, suitable location, supportive institutions, and tourist attractions and offerings as supportive opportunities. Lastly, the results confirmed that there is a very high challenge of adequate infrastructure as well as high challenge of collaboration, poor product development, adequate marketing and promotion, welldeveloped human resources, bad image that hinder traditional medicine-based health tourism development. Based on the results of the study, it is recommended that stakeholders in this sector should strive to exploit high authenticity, plurality, healing ability, and nature-based origin potentials of traditional medicines along with highly available abundance opportunities by solving very high infrastructural and high institutional collaboration, human resource, marketing, product development, and bad image challenges to develop traditional medicine-based health tourism in Bahir Dar city.