The move comes as European governments try to tackle the problem of refugees leaving war-torn countries in Africa and aiming to enter Europe via perilous crossings over the Mediterranean Sea, often organized by criminal gangs.
"This decision follows an assessment by the Commission, which concludes that cooperation by Ethiopia in the field of readmission of its nationals illegally staying in the EU is insufficient," said the EU Council.
Earlier this month, European lawmakers approved a revamped migration system. The pro-EU political center says this would reduce the number of migrants arriving without official documents, as it seeks to stem gains by the far right ahead of the bloc's parliamentary election in June.