Ethiopia has cancelled 330 foreign investment licences, claiming the companies had failed to implement planned projects.
The Ethiopian Investment Agency said the investors had failed to carry out various projects in different parts of the country after they were awarded licenses worth hundreds of millions of dollars.
The foreign investors, including those from India, China, United Arab Emirates and neighbouring Sudan, have been affected by the move, which took effect this March.
Ethiopia said most of the affected investors have had their licences lying dormant for more than three years after the permits were awarded.
A large number of foreign companies are currently undertaking multi billion dollars investments in Ethiopia's agricultural and mining sectors.
India and China are among the country's top the investors, with each country counting over $4 billion in investments.
In recent months, however, The Oakland Institute - a US-based research agency- has decried the relocation of thousands of Ethiopians from their traditional prime farmlands after 600,000 hectares of land were leased to 10 Indian companies on 99 year leases.
They say the Horn of Africa country has leased lands the size of France to the Indian companies, doling out incentives that include generous tax breaks and some of the world's cheapest land leases to the detriment of the locals.