Rainwater harvesting (RWH) has been practiced in Ethiopia since ancient times, but it has shown little development, because of inefficient techniques. Most efforts to capture rainwater did not show significant results owing to poor design and implementation resulted from slow technical development. This paper details design improvements tested on a demonstration site as well as an analysis of operational parameters. Similar, rainwater quality improvement techniques applied for the system are also discussed. Various scenarios were studied relating design and operating parameters for replicability and decision-making before construction stage. Common components of existing RWH systems in Ethiopia are discussed and contrasted with the implemented demonstration RWH system. Moreover, particle separation theory and techniques are introduced as quality improvement techniques. Results of the analysis also suggest a possibility of satisfying building demand by utilizing the installed system and it also shows the potential of RWH in Ethiopia as an alternative water source.