Originally known as Sayo, after the semi-autonomous kingdom that had ruled in this area in the years after 1900, by 1920 this town served as the seat of the governors of this part of south-western Ethiopia until the
Italian conquest.
Richard Pankhurst notes that during this period Dembidolo was "a great commercial centre for coffee, where by the 1930s perhaps 500,000 kilos of beans, besides large quantities of wax and skins, were exported every year to the
Sudan." Emperor
Iyasu V visited Dembidolo around 1912, and was welcomed by
Dejazmach Jote. By 1958 Dembi Dollo became one of 27 places in Ethiopia ranked as First Class Township. That same year, the
Commercial Bank of Ethiopia opened a branch in the town. A modern water supply system was expected to be completed in the town by October 2017. == Demographics ==