Background Ethiopia is one of the world’s oldest countries, with a fascinating history of herbal medicine. However, there is a lack of evidence for the regulatory framework for herbal medicines and its implementation. Thus, the aim of this study was to evaluate the policy governing herbal medicines regulation and its implementation in Ethiopia. Methods and Materials An archival review, a semi-structured interview with key informants, a cross-sectional study involving traditional healers, and an institution-based cross-sectional survey were conducted from June 15, 2020 to December 25, 2020. The qualitative data was transcribed using Microsoft Word 10, whereas the quantitative data was recorded and analyzed using SPSS 20 computer statistical software. The study’s findings are summarized using descriptive statistics. In addition, multiple logistic regressions were performed to identify factors affecting regulation of herbal medicine (HM) in Ethiopia. Variables with p<0.05 were considered potential predictors. Results According to all key informants, Ethiopia has yet to adopt distinct policies and laws on herbal medicine that may provide an independent regulatory framework. Similarly, the majority of respondents in an institution-based survey indicated that there were no defined policies (n=52, 57.3%), laws (n=53, 59.6%), or registration systems (n=67, 75.3%) for herbal medicine. However, traditional healers claimed that they are licensed by either the Woreda Health Bureau (n=21, 95.5%) or the Regional Health Bureau (n=1, 4.5%) to legally practise traditional herbal medicine. Besides, no traditional healer is licensed by Ethiopian Food and Drug Administration (EFDA) or Ministry of Health. Conclusion Ethiopia has yet to adopt distinctive herbal medicine policies and laws to provide an independent herbal regulatory system. Despite the fact that the EFDA has a mandate for herbal medicine regulation, traditional healers are licensed by the woreda and regional health bureaus, thus more investigation is needed.