Ethiopia experiences an energy and environmental crisis due to the sustained reliance on woody biomass to satisfy its energy needs. This situation could be improved by using biogas. This paper analyses the current status of the domestic biogas sector in Ethiopia and identifies barriers and drivers that influence its development and further growth. The analytical framework used for the analysis combines the Multi-Level Perspective (MLP) and Strategic Niche Management (SNM). The information sources are: desk study through literature and internet research, online interviews and questionnaires with Ethiopian stakeholders, and an extensive field study including a large number of interviews with stakeholders inside and outside Ethiopia. The biogas sector in Ethiopia started with the launch of the National Domestic Biogas (NBPE) programme in 2008, which has led to the dissemination of over 8000 biodigesters so far, about 60% of what was initially intended. The use of domestic biogas has been triggered by the energy crisis in Ethiopia and the suitability of the technology with the physical geography. However, the dissemination has been affected by factors such as economic instability, poverty and illiteracy. Also, many Ethiopian farmers are trapped in a lock-in, where due to their limited purchasing power they cannot afford the niche technology; at least in the way it is being disseminated. Within the emerging biogas sector, the NBPE designated a diverse set of actors to contribute to the implementation of the niche technology. However, their alignment is poor and the private sector is not involved. Expectations have had to be lowered because targets were not met. Also, learning processes are not optimal. The paper is innovative because it provides an up-to-date review of status of and bottlenecks and drivers in the biogas sector in Ethiopia and it provides more insight in the applicability of the SNM and MLP frameworks to a sustainable innovation in a developing country.