Democracy and governance are useful instruments to hasten economic growth and better living condition. However due to long autocratic administration and ever extended feudal regimes that followed by a military dictatorship rule there is lack of both governance and democracy in Ethiopia. Some say democracy may be conceived and procreate by foreign assistance. Foreign aid would cultivate both, if it is handled appropriately. The research attempts to evaluate and assess the role of foreign aid in the democratization and formation of governance in Ethiopia: one of list developed nation but with glorious past and future. Ethiopia is highly dependent on foreign aid. Nevertheless due to the political, diplomatic and economic reasons together with indisposition of the donors, the prevalent international political condition and the political defiance of the recipient particularly the ruling regime made aid not viable to attain its latent objective. Foreign aid together with pluralistic culture and above all political willingness of government officials can dexterous democracy and governance. The findings of the research will tell how aid can cultivate democracy and governance in Ethiopian