The state-owned Ethiopia News Agency (ENA) said an organised mob carried out a spree of murder and looting in and around Burayu town, leaving 23 people dead and 886 displaced, citing Oromia regional police commissioner Alemayehu Ejigu.
ENA reported that over 70 people had been arrested.
On Twitter, Prime Minister Abiy Ahmed’s chief of staff, Fitsum Arega, said the leader “strongly condemns the killings and acts of violence against innocent citizens.”
“These cowardly attacks represent a grave concern to the unity and solidarity of our people and will be met with an appropriate response,” he said, without providing a toll.
On Monday an angry crowd gathered in central Meskel Square to protest against the killings which some blame on ethnic Oromo youth.
There was a heavy police presence in the city centre while some roads out of the capital were blocked by other protesters.
The weekend killings followed the triumphant return from exile of leaders of the once-outlawed Oromo Liberation Front (OLF) rebel group who struck an agreement to lay down arms with reformist Prime Minister Abiy.
Addis Ababa is an ethnically-mixed city of around four million people, but is situated within the larger Oromo-dominated Oromia region.
Oromo-led anti-government protests that began in late 2015 helped bring about the resignation of Ethiopia’s former leader and Abiy’s subsequent rise to power.