By using descriptive and explanatory research design and mixed approach, this study tried to identify and investigate the main determinant factors that affect propensity of lease financing by manufacturing small and medium enterprises in Ethiopia. Self-administered questionnaire were used to collect primary data and the secondary data was collected through reviewing proclamation, procedures, journals and various important literatures. The target population for this study was 1797 manufacturing small and medium sized enterprises located in Addis Ababa city administration. The sample size was determined by using the method appraised by Carvalho (1984) and a sample of 200 manufacturing SMEs was selected from Addis Ababa city administration using stratified proportional random sampling technique. The study were devised logistic regression model, where use of lease financing was regressed against enterprise related factors, institutional framework factors and leasing information and knowledge variable factors using STATA V14. The data collected was described using tables, bar charts, frequencies and percentages line with the objectives of the study. The variables selected were identified using stepwise regression method and presented as a final model using for analysis. The study revealed firm size, firm’s age, growth opportunity and leasing information, knowledge and awareness have positive and significant factors. In contrast availability of loan, collateral and institutional framework factors are negative and significant impact that determine the lease financing propensity of manufacturing SMEs.as recommendation, the government should, intuitively appreciate and assist leasing systems as well as SMEs to freely engaged on lease financing system for development of it in the country by formulating attractive tax schemes and simple regulations