Institutionalization has a negative impact on children’s psychological adjustment. The absence of proper care for a staggering number of children devoid of parental care has been recognized as a severe problem requiring comprehensive and urgent intervention. The purpose of this research was to examine children’s living experiences in care institutions in Ethiopia. Qualitative research approach was used in which data were collected using in-depth interview, observation, key informant interviews, and focus group discussion methods. Data were tape-recorded, transcribed, manually organized after searching themes within the data. The results of the study show that inmates consider the basic needs fulfilled by the institution as better than they received in the family of origin. It was also found that the institution has problems in terms of fulfilling the emotional and psychological needs of the children. Furthermore, research participants experience feelings of loneliness and being neglected in the institution. In addition, difficulties of establishing relationship were also found. Above all, the institution lacks the experience of reintegrating the children to their families of origin. Whereas institutional care is found to be better in terms of fulfilling the basic needs of the children, it has problems when it comes to fulfilling the emotional and psycho-social needs of the children hosted. Therefore, the personnel of the institution should take trainings to improve the level of emotional attachment they should maintain with the children. Moreover, the institution should have a clear long-term strategic plan about how to admit the children, how to care for them, and finally how to reintegrate them to their families of origin.