Expanding access to HIV counseling and testing (HCT) and antiretroviral treatment (ART) has reduced morbidity and mortality in people living with HIV/AIDS. As a result, many countries are scaling up HIV/AIDS services. In this paper we discuss challenges experienced during the move toward universal access to HCT and ART services in Ethiopia. We reviewed routine reports from the Ministry of Health and implementing partners. We also had interviews, about linkage to and retention in care of patients, with 10 HIV/AIDS program managers, as well as 2 to 7 health care providers and 5 to 15 patients in each of 23 health centers and 32 hospitals in all regions of the country. We found that the number of people tested for HIV increased 10-fold from 435,854 in 2005 to 4,559,954 in 2008. Only 61% of the HIV-positive patients were linked to chronic care immediately after tested for HIV. The number of patients initiated on ART annually increased from 26,021 in 2005 to 53,696 in 2008. Attrition of patients increased from 18% in 2005 to 26% in 2008. Our interviews indicated that fear of stigma, transport cost, feeling healthy and opting for traditional medicines were the main reasons for poor linkage to and retention in care. Lack of nutrition and feeling better were also reasons for poor retention. In conclusion, in spite of the rapid scale-up of HCT and ART services in Ethiopia, linkage and retention were not adequate. Therefore, strategies should be developed and implemented to improve linkage and retention.