This paper presents findings on water and sanitation service levels from 16 small and medium towns in four regions of Ethiopia. In these settlements, the proportion of people with access to improved water and sanitation services is found to be high and consistent with other major datasets and reports for urban Ethiopia. However, when service characteristics such as reliability, quality, quantity and accessibility (including travel and queuing time) of water are considered, and for sanitation, quality and use, a different picture emerges. Only a small minority of households, 9% for water and 3% for sanitation, were found to receive services that meet the standards set in the Ethiopian government's first Growth and Transformation Plan (GTP I). Under the second Growth and Transformation Plan (GTP II), standards for urban water services have been set higher and current performance levels are even lower. This paper illustrates the discrepancies between average coverage figures, actual service delivery levels and the increased demands of the GTP II. The paper illustrates the huge scale of the challenge faced in improving WASH service delivery levels in small towns in Ethiopia, which is an issue of wider relevance in the context of the Sustainable Development Goals.