Ecological Processes,2017.Over the last century, Eucalyptus has rapidly expanded across the globe. It has become the most planted tree species. Environmentalists fear this for the perceived negative eco-hydrological impact. Foresters and wood industries support its expansion looking at its socio-economic benefits. Ethiopia is one of the countries where Eucalyptus dominates forest development gains in the last century. The main purpose of this review is to evaluate the expansion, benefit and challenges of Eucalyptus in Ethiopia. Eucalyptus was introduced to Africa, and Ethiopia, around the end of the 19th century, in 1890s. Since then it has continued to expand to cover wider geographic areas within Ethiopia: highland and lowland. It is providing multiple purposes, economic and social, for millions of households in urban and rural areas. It has substituted effectively some of the natural forest’s functions, principally in wood supply; hence this way it has contributed to reducing pressure and in slowing down deforestation. Yet Eucalyptus sustained blame for ecosystem water and soil nutrient drains, and allelopathic effect to suppress native flora growth. Studies on these aspects of the genus are inconclusive. Some argue the extravagant use of water and nutrient, while others argue otherwise. There are studies that show water and nutrient use of Eucalyptus is based on availability: for instance, dry season and wet season uses are not the same. The most known about Eucalyptus is its high nutrient and water use efficiency. Therefore, when evaluated on per volume of water, nutrient and land allocated for biomass production, Eucalyptus will provide the highest biomass return. This may make it the preferred species. The paper concludes that the development of Eucalyptus forestry is crucial in narrowing the gap between forest product demand and supply in the current context of Ethiopia and most African countries, but such development should be managed with proper silviculture: Planted in the right site and tended properly to optimize its positive values and reduce possible negative effects.