This study explores the post-Cold War relationship between Ethiopia and Djibouti, with a focus on events after war era 1990. It investigates their historical connection, Djibouti’s separation from Ethiopia, and the impact of geopolitical dynamics and other factors on their relationship. Historical methods and qualitative research are used to gather and analyze data. The origins of their relationship date back to ancient times when Djibouti was part of Ethiopia before being occupied by the French. After French occupation and post-liberation period, several treaties were signed between the rulers of both countries, but changes in transportation and other challenges altered their relationship. After the Cold War, their relationship reached its peak due to Ethiopia’s dependence on Djibouti as a gateway to the sea, especially after the Ethio-Eritrean war. Military and security cooperation between the two countries was facilitated by global competition for military bases in Djibouti, border conflicts with Eritrea, and joint anti-terrorism initiatives. However, peace agreements between Ethiopia and Eritrea, as well as growing relations with Somaliland, could create additional port options for Ethiopia which could potentially affect Djibouti’s income in the future. Differences in opinion on Somalia’s reunification and irredentism among Somalis may pose challenges for both countries. Additionally, global warming and desertification in Africa could affect water and electricity exports from Ethiopia to Djibouti. Despite these challenges, both countries have benefited from their relationship. In conclusion, this study provides insight into the historical development of Ethiopia and Djibouti’s relationship since the Cold War, highlighting the various factors that have influenced their dynamics. It is a valuable resource for understanding the complexities and potential future developments in their relationship.