This paper examines the problems associated with youth capacity building and unemployment in Ethiopia. It argues that capacity building is a continuous process of development that could be accomplished through participation of the citizens in their own development. The dynamics of development at both national and grassroots levels in Ethiopia must involve the exposure of government change agents to participatory learning and action methodologies. The paper uses data derived from primary and secondary sources to analyze the problems associated with youth capacity building and unemployment in Ethiopia. The conceptual framework is based on the social constructionist, the build block model of development, monetarist and the Keynesian theories. The findings show that technical capacity building in Ethiopia will serve as a lever for economic and social development. There is, however, a negative correlation between the nation’s educational system and the kind of technical skills needed to achieve its sustainable development goals.