The main purpose of this study was to investigate effect of e-banking services on customer satisfaction, in relation with demographic characteristics, and major problems in e-banking activities to satisfy the customers of commercial bank of Ethiopia in Bahir Dar city. The study used quantitative research approach by employed multiple linear regressions models for Customers Satisfaction in Electronic Banking (CSEB) and ANOVA test were computed to examine the relationship between demographic characteristics and satisfaction of e-banking users. The sample populations of the study were the five branches of commercial bank of Ethiopia in Bahir Dar city randomly selected by using simple random sampling(lottery system) and Non-probability sampling method (convenience sampling) had been adopted in selecting a sample size of 392. Primary data were collected by using 5-point Likert -Scale structured questionnaire and interview with marketing managers and customer service supervisors of commercial bank of Ethiopia. A total of 375 questionnaires were properly filled and returned. The quantitative aspects of the data were analyzed through SPSS version 20. The empirical result shows that service quality dimensions; Ease to use, Transaction efficiency, Reliability, Service security and Service content have strong influence on e- banking user’s satisfaction level in commercial bank of Ethiopia in Bahir Dar city. Thus, management bodies of commercial banks should strive to scale up these service dimensions. There was also a relationship between satisfaction in e-banking and age and educational level of users of e-banking. The major problem faced by commercial bank of Ethiopia in relation to e-banking is network failure due to poorly developed telecommunication infrastructure, lack of reliable power supply. In order to sustain a reliable service for such technology, commercial bank of Ethiopia should work with government bodies (Ethio-Telecom and Ethiopian Electric Power). They also need to developed skills and knowledge of customers in using e-banking service.