The rapid urbanization and urban expansion in the developing world require a scientific understanding of complex urban growth patterns and processes. This knowledge is highly crucial to sustainable land management and urban development planning. Progress in modern Remote Sensing and GIS techniques have opened up great opportunities, and significant success has already been achieved in monitoring and managing fast urban growth. This study focuses on mapping urban expansion and site suitability analysis for housing in Adama city. It analyzes the cause and its direction of expansion. The basic data used are topographic map (1:50,000), Aerial photographs of the city of (1965 and 1972), IKONOS image of the city (2004) and GIS data layers like Road, railway, River, Population, Land use, slope and Soil. It has been found that the built up area expansion of the city between 1965 and 1972 was 120 hectare which was 48% expansion and the built up area expansion of the city between 1972 and 2004 was 704 hectare which was 290.3% expansion. The road length of 1965 and 1972 was calculated out as 41.1 km and 72 km respectively .Hence the road was increased by 30.9 km (54.8%) between 1965 and 1972. Moreover, the road length of 2004 was measured as 160.3km. The road network expansion of Adama city from 1972-2004 was increased by 88.3km. This attempt has also been made to propose new sites for housing expansion based on local and other countries criteria’s using seven parameters, Land use, population density, road, railway, river, and slope. Using ArcGIS 9.1 of spatial analysis weighted overlay analysis have been carried out by giving weights for each parameter using pair wise method and produce new sites for housing . Once suitability for housing expansion has been completed sites were evaluated with respect to the availability of utilities like electric, telecommunication and water supply utilities, to support the proposed sites to be more comfortable and safe in terms of these basic infrastructures. The study strongly supports the usefulness of advanced technologies like Remote Sensing and GIS for Urban expansion study and selection of best sites suitable for housing expansion based on certain criteria.