The Prosperity Party was formed and formally recognized by the National Electoral Board of Ethiopia (NEBE) in December 2019 through the merging of three  EPRDF member parties, namely, the Oromo Democratic Party (ODP), the Amhara Democratic Party (ADP) and the  Southern Ethiopian Peoples’ Democratic Movement  (SEPDM).Also, included in the PP are the Somali People's Democratic Party (ESPDP), the Afar National Democratic Party (ANDP), the Benishangul-Gumuz People's Democratic Unity Front (BGPDUF), the Gambela People's Democratic Movement (GPDM) and the Harari National League (HNL). mThe  Tigray People's Liberation Front (TPLF), which had been the dominant party in the former EPRDF-led government  for 27 years, rejected the merger and formation of the Prosperity party. 

TPLF immediately escalated its animosity to the PP, presenting present danger on the country by attacking the Northern Command of the National Defence Force (NDF) in November 2020 , which led to the conflict in  the Tigray. Between 2016 and 2018, Ethiopia experienced a nationwide unrest and a total political crisis that eventually led to the resignation of the former Prime Minister Hailemariam Desalegn. 

 Later on, it was revealed that there had been a battle between the reformist group in EPRDF and those who advocated for maintaining the status quo both in the front and government offices. The demands of the widespread protests urged a comprehensive reform in the country, culminating in the dissolution of the EPRDF and formation of the new party, Prosperity party. After Prime Minister Dr. Abiy Ahmed took office on March 27, 2018, and paved the way for the formation of the prosperity party.