The decision by the northeastern city of Mekele, capital of the Tigray region, makes smoking illegal in bars, restaurants, schools and hospitals, as well as outdoors in stadiums and during religious festivals.
Advertising tobacco is also banned, Ethiopian media reported.
Fines have been set at $50 for individuals and $150 for owners of bars or restaurants, a stiff punishment in a country where average monthly salaries are less than $40, according to the World Bank.
Ethiopia’s parliament last year voted to ban smoking in public places to combat tobacco-related diseases, but the law had not been enforced until now.
Nearly one in 10 young Ethiopians smoke, according to the World Health Organization.