This study is intended to investigate bamboo-based traditional handicraft sector in Awi Zone, Northwestern Ethiopia. In-depth interviews, focus group discussions, observation and document analysis were used as instruments of data collection. This study revealed that different traditional bamboo handicraft outputs have been produced in the study area. This sector is contributing a lot in fulfilling the material needs of the society. The wisdom of bamboo processing is largely obtained through coaching by parents and the local people. Ordinary tools are employed in the production process. The presence of bamboo resource and traditional wisdom of bamboo processing in the locality and the existence of promising policy environment at country level, the possibility to learn from best practices of bamboo handicraft processing at global level are the opportunities which would be helpful to develop this sector. However, this sector is constrained by challenges such as lack of product quality, trained manpower, training and technology, capital, working and selling place, market linkage, support service, organizational, attitudinal and bamboo resource related challenges. Thus, efficient leadership should be employed to exploit the opportunities and get ride the challenges that constrain the bamboo traditional handicraft sector.