Headwater streams in the highland regions of Ethiopia are exposed to severe human disturbances because of rapid population growth. Protection and management of headwater streams require the development of informative indices that can capture disturbance and assess streams water quality in highland regions. Therefore, we developed a multi-metric index based on macroinvertebrate communities, to assess the ecological condition of the headwater streams in the Ethiopian highlands. We reviewed 38 potential metrics, representing various aspects of the macroinvertebrate assemblages, and selected four of them [total family richness, Simpson index, percentage of shredder, and family richness of EOT (Ephemeroptera, Odonata, and Trichoptera)] as final core metrics. A trisection inter-quartile range system was applied to derive scores for each core metric at impaired and reference sites. The macroinvertebrate multi-metric index (MMI) distinguished well between impaired and reference stream sites and was negatively correlated with the degree of disturbance. The results suggest that the MMI is robust measure of disturbance and can be used as a sensitive tool for evaluating the ecological condition of headwater streams in Ethiopian highlands.