The intent of this thesis was to empirically examine the effect of firm specific and macroeconomic factors on dividend payout decision in the Ethiopian private commercial banks. Specifically, this study examined the effect of profitability, liquidity, leverage, bank’s size, bank’s growth, inflation and tax on the dividend payout decision. To investigate the effect of such factors, panel data were used from national bank of Ethiopia and from private banks’ audited annual report. The samples of this study were eight private banks covering the period of 2008-2016. To analyze the data, both descriptive and regression analysis were used through STAT Aversion 12, and fixed effect panel data estimation technique is applied based on Hausman test results. The results of the fixed effect regression model indicatethat liquidity, bank’s size and inflation have statistically positive impacts on dividend payout decision. On the other hand, this study result suggests that, bank’s growth and investment opportunity have significant negative impact on dividend payout decision but leverage ratio have insignificant negative impact on the dividend payout decision. Whereas profitability and tax liability growth rate have insignificant positive effect on the dividend payout decisions of Ethiopian private banks. Thus, based on the findings of the study Ethiopian private commercial banks top level managements were advised to have deep attention on profitability, size, growth, and inflation when they make dividend payout decisions.