Ethiopia is committed to using sustainable energy sources due to the limited availability of traditional fuel and their environmental damage. This study examines the viability of biofuels as an alternative fuel source in Ethiopia for community’s sustainable transition to cleaner energy. The research reviews relevant publications, policies, initiatives, and programs, identifies barriers to implementation, and collects data through literature reviews, community discussions and observations of energy experts. Ethiopia has 8.6 million hectares available for energy crops and governmental policies are encouraging the use of clean fuels. The study suggests that biofuel can support rural development and environmental sustainability. However, challenges to the widespread adoption of alternative fuels by communities exist such as flawed policies, limited technical skills, insufficient maintenance experts, a scarcity of biofuel production companies, and inadequate markets for biofuel seeds. To achieve a sustainable future through the use of clean energy in the country, policy interventions and investment strategies are necessary. All stakeholders must adopt policies and develop capacity-building programs while providing incentives for developers and users.