Ethiopia's urban expansion and development strategy has been based on the acquisition of land by government from adjacent peri‐urban areas. The land in the peri‐urban areas is predominantly agricultural in nature, and it has been held by local farmers or landholders. This article aims to examine the nature of urban expansion and development from the perspective of the land rights of the local peri‐urban landholders. To achieve this purpose, it has employed a case‐study approach. As urban territory extends into adjacent peri‐urban areas, the land rights of local landholders are expected to be automatically cancelled and transferred to people who can pay for a lease. This shows that very little attention is paid to the land rights of local landholders in peri‐urban areas in the process of urban expansion and development. Therefore, it is not difficult to imagine that local landholders in those areas have a prevailing sense of insecurity about their land.