This study investigates the effect of sport competition on the development of Harar city economy. The purpose of the study was to examine the effect of sport competition to what extent contribute to raise Harar city economy. In order to examine this, a descriptive survey design was performed on a small scale sport competition hosting in Harar city. Questionnaires were conducted on 92 participants and also information was gathered from interview, observation and document analysis to examine the economic effect of sport competition on the host city. Then the data analyzed via descriptive statistics by frequency and percentage with the help of SPSS. Indeed the qualitative data analyzed through narrative analysis. The study used tables, graphs and chart to briefly describe the result. The results show that Harar city economically benefited from hosting small scale sport competition even though there were economical challenges and lack of the management skills of the competition organizer hindered the city from getting more. As this study illustrates, their sources of income more dependent on the governmental budget; therefore, creating different income generated sources like sponsorship agreement, special fund raising program and other activities are good rather than depending on governmental budgets only to host successful sport competition. And the negative impact of the competition can reduce by good management skills of the organizer. Therefore, the sporting event organizers should qualified in the field of sport management to increase the positive impact of events. Indeed, the sporting event literature seems dominated by mega sporting event research and lacks a focus on small-scale/regional events. Investigations into these types of events can be further advanced to examine effects of sport competition on economical development of smaller regional communities.