Introduction and Background: Khat (Catha edulis Forsk) known for long period as an indigenous plant to Ethiopia, has many mixed effects and impact. Some consider it as a good means to socialize. Others consider it as a good source of income. Nowadays, as a result of its effect on health, public health concern is growing. However, there are no policies controlling these khat effects. Objective: To present policy option to curtail health and economic impact of khat chewing practice in Ethiopia. Methods: Narrative literature review was made to look into different effects of khat chewing with a particular reference to Ethiopia. Key findings khat chewing has stimulating, euphoric and addictive effects. It has a constricting effect on blood vessels leading to hypertension. It has also neuropsychiatric and physical consequences including aggression, suicidal ideation, anxiety, paranoia, manic behaviors, insomnia, depression, increased heart rate, anorexia and weight loss, dental and pulmonary problems. Additionally, khat abuse found linked to liver damage and failure. Conclusion: Given that medical risks of khat use are modest, or studies are not conclusive, there should be a regulatory framework with the objective of protecting consumers and community. This is best achieved by establishing processes for the quality control of khat and by regulating access and availability. Conclusive studies are very rare and even some are inadequate and contradictory. Most of the evidences on adverse effects of khat come from case reports and observational studies. Therefore, high quality research is justified.