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This paper reviews the legal rights of peasants and pastoralists in Ethiopia in general and the Oromia Regional State in particular; and examines the adequacy of compensation payable for expropriation of rural landholdings in Oromia. The study found that although the FDRE Constitution of 1995 and Oromia Revised Constitution of 2001 provide for secured and lifetime use rights over rural landholdings and also provide for payment of commensurate amount of compensation. There are great discontents in the research site of the study (in Eastern Industrial Zone) due to payment of low amount of compensation because of unscientific method of valuation. The paper also described situations in which public purposes are not implemented in accordance with the time and manner agreed in peri-urban areas of the region. The rural citizens who have been affected by the expropriation are facing difficulties to restore their life because of low amount of compensation and due to lack of commitments from the part of expropriating authorities to help them rehabilitated and public purpose has become a looming crisis to the life the farmers.