This paper investigates the determinants of rural poverty in Ethiopia. Our study is based on information gathered from a three-round survey of 149 rural households in three districts of Ethiopia during the 1999/2000 cropping season. The FGT poverty index (index proposed by Foster, Greer and Thorbecke) is employed to examine the extent and severity of rural poverty. It reveals that nearly 40% of the sample households live below poverty line with an average poverty gap of 0.047. The binary logit estimates shed light on factors behind the persistence of poverty and indicates that rural poverty is strongly linked to entitlement failures understood as lack of household resource endowments to crucial assets such as land, human capital and oxen. Our findings suggest that improved targeting devices can be a useful instrument in reducing poverty, in particular to reach the poorest of the poor.