Introduction: It is widely and increasingly accepted that urbanization is an inevitable phenomenon. Urbanization has occurred as a result of high natural urban population increase and massive rural-to-urban migration. The rapid rates of urbanization and unplanned expansion of towns have resulted in several negative consequences, particularly in developing countries like Ethiopia. Most cities in developing countries are expanding horizontally and the population is moving to unplanned settlements on the peripheries at the expense of agricultural lands and areas of natural beauty. Land delivery system is without normal procedures, no legal framework, bureaucratic, not transparent and inclusive, dishonest and irresponsible to land demander’s affects the efficient use of the urban land and delivery system which in turn leads to illegal procedures, land speculations, market distribution, illegal and /or squatter settlement, poor infrastructure and service provision, inadequate collection of revenue that hinders economic development of the towns. Objective: To examine squatter settlement and its impact on urban amenities of Tilili Town, Awi zone, Ethiopia. Method: a community based cross-sectional quantitative and qualitative study was conducted in Tillili Town, Guagusa shekudad district; Amhara Region from March 1 to Sept 30, 2015 on squatter settlements. sysestematic sampling technique was done employ to select the study subjects. Census of all squatterd settlements have carried out to identify eligible study participants in the town. Once we get the lists of eligible squattered settlements, simple random sampling technique was used to select the 50% study participants. The number of study participants was sampled from the selected subKebeles determined using proportionate-to-population size. The collected data have cleaned, coded and tally. Simple frequencies used to see the overall distribution of the study subject with the variables under study. Conclusion and recommendation:- Squatter settlements in the study area are mainly located in the peripheries, along the rivers and hilly areas of the town, where they are numerous, and irregular in shape. In most cases they are characterized by large plot sizes and have greatly contributed to the unplanned and rapid horizontal expansion of the built-up area of the town. Administrative decision measures towards squatter settlement should be applied soon considering of low income groups as much as possible to use a good service and to fulfill infrastructures.