There is a massive higher education expansion in Ethiopia. However, the efforts to expand higher education are characterized by great opportunities and significant challenges. The current higher education policy formulation and practice are the result of long history of traditional education in Ethiopia, the western countries' influence and the current opportunities and challenges observed in the sector. Thus, to formulate and enact workable higher education policy in Ethiopia, one must understand the trends of higher education in Ethiopia with emphasis on purposes, challenges and achievements. The article, therefore, tries to pinpoint the history of Ethiopian higher education and concludes with recommendations for current efforts to improve higher education in the country.