The leather industry stands out as a notable contributor to national and global economic growth. In Ethiopia, the tannery sector is important for exports, economic growth, and employment. However, the tannery industry is the most pollutant generating and environmentally unfriendly industry in the world and recognized as a significant source of pollution of surface waters in Ethiopia. This review aims to assess the characterization, treatment, and impact of tannery wastewater. The authors reviewed 117 published materials, including articles and theses, related to the research area. The review results reveal that Ethiopian tannery effluents contribute to elevated levels of chemical oxygen demand (COD), biological oxygen demand (BOD), total dissolved solids (TDS), chromium (Cr), sulfide (S2−), and total nitrogen, which exceed national discharge limits and compromise water quality in rivers, notably the Little Akaki River. The adverse effects extend to soil and agricultural produce, posing significant risks to public health. Conventional treatment methods are widely used in the treatment of tannery wastewater but have limited effectiveness in meeting regulatory standards. This review emphasizes the urgent need for strengthened policy enforcement and investment in modern treatment technologies to develop sustainable solutions that mitigate the environmental and health impacts of tannery wastewater in Ethiopia. Additionally, nanomaterial‐based adsorption and photocatalysis have shown promising results in efficient pollutant removal, further research is recommended in this area.