Health is a fundamental prerequisite to human development. Evidence based strategies for effective health interventions emanate from a representative, ethical and rigorously conducted health research. Health research undertakings require the coordinated efforts of researchers, research funders and research users as well as the presence of detailed laws and regulations conducive for undertaking health research. Global health research partners have stressed that attempts to improve country level health research should follow the "National Health Research Systems" approach as components of the system are highly interrelated. The systems approach begins with a situation analysis of the existing national health research system. History of health research in Ethiopia spans nearly seven decades. Study of historical abstracts, websites of health research and academic institutions, review of relevant publications, site visits and interview with institution authorities was undertaken to provide an overview of past and present status of health research in Ethiopia. The researcher profile, disease and health focus, publication audit, dissemination modalities and international collaboration of research institutes are outlined. Applicable Ethiopian laws and regulations regarding health research are documented. Existing challenges to conduct of health research are outlined. The number of health researchers, research institutes and volume of research output so far is small. Detailed laws and regulations pertaining to health research are not enacted and governance of health research is not clearly articulated. There are global, regional and programmatic inequities in the national health research arena. Evolution of the health research in the country into an organized "National Health Research System" is still at an early stage. Suggestions are forwarded to augment the ongoing discussions on strengthening efforts to improve the national health research system. These include the needs for establishing a Medical Research Council; adopting or adapting laws and regulations governing health research; formulation of a national statistical and data policy; establishment of a national library; establishing research funding and financing agencies; strengthening public-private partnerships in health research; maintaining national and international commitments towards research financing; increased incentives provided to researchers thereby curbing brain drain; attracting young scientists to a career of research and increasing capital expenditure in order to establish research institutes in various parts of the country. The historic juncture offered by the second millennium celebrations should be used to review the status of health research and indicate strategies to strengthen it. A strong National Health Research System is one of the essential prerequisites to improving the health status of the nation. It is hoped that this outline of the status of health research in Ethiopia at the end of its second millennium and the proposed actions will indicate areas for future improvement.