Rapid urbanization in Ethiopia has intensified the expansion of informal settlements that hinders the implementation of smart urban planning, particularly in fast-growing cities such as Bahir Dar. This study aims to assess the spatiotemporal expansion of informal settlements and examine the challenges to implement smart City planning in Bahir Dar City, Ethiopia, using Geographic Information Systems (GIS) and remote sensing techniques from 2004 to 2024. This study focuses on identifying the institutional and socioeconomic factors influencing their growth, and evaluating the constraints and opportunities for integrating smart urban planning approaches. A mixed research approach was employed; a cross-sectional survey design was used to collect quantitative and qualitative data through questionnaires, field observations, and GPS-based ground truthing, from satellite imageries (historical Landsat images). A total of 400 respondents were selected using a combination of simple random and purposive sampling techniques. Spatial data were analyzed using GIS-based land use/land cover classification and change detection techniques, while survey data were analyzed using descriptive statistics such as frequencies and percentages. The results show a rapid and continuous expansion of informal settlements from 10.38 km2 (4.86%) in 2004 to, 22.93 km2 (10.74 %) in 2014, and 41.95 km2 (19.66%) in 2024, indicating significant conversion of other land uses (farmland, wetland, grassland and forest) into informal areas over time. Spatial analysis reveals that informal settlements appeared in environmentally sensitive lands, progressively expanded into dense and peripheral clusters, particularly in western, southwestern and northeastern parts of the city. The findings further indicate that rural–urban migration, rapid population growth, high land costs, weak governance and limited access to formal housing are the main drivers of informal settlement expansion. Institutional weaknesses, including poor policy implementation, weak coordination, and ineffective land administration systems, significantly contribute to uncontrolled urban growth. Additionally, most informal settlements lack basic infrastructure and services such as roads, sanitation, and water supply. Based on the findings, the study recommends that the government should strengthen land administration systems through transparent and digital land registration, enforce urban planning regulations consistently, and expand affordable housing programs to reduce pressure on informal land occupation.