This thesis deals with the establishment of technology business incubation center focusing on metal and engineering sector. Technology business incubators play an indispensable role for transformation of technological ideas or innovations into commercial products by providing necessary facilities and supports for entrepreneurs. Hence, the principles behind technology incubation center are reviewed from literatures, research papers and web sites. Since every sectors have their own unique facilities requirements in the establishment of technology business incubation, metal and engineering sector is selected as a case study. The sector is at forefront in the realization of industrial lead economy; therefore, the overall impacts of the progress in metal and engineering sector on development endeavor are elaborated. The problems which hinder the technological development of the sector such as insignificant support for technology oriented entrepreneurs, lack of systematic technology transfer mechanism, lack of institution which provides facility and business development services and lack of comprehensible guidelines for the establishment of technology business incubators are identified. The role of technology incubation center establishment as a tool of assisting the technological development of the sector and the prevailing Ethiopian policy environment toward such establishment are discussed.