A deadly explosion struck the huge rally for Ethiopia's reformist new prime minister shortly after he spoke and was waving to the crowd that had turned out in numbers unseen in recent years in the East African nation. Picture: Mulugeta Ayene/AP (ANA)

Addis Ababa - Ethiopia's new Prime Minister Abiy Ahmed escaped a grenade attack on Saturday at a rally in the capital that killed one person and left scores wounded, officials and witnesses said.

The attack was launched by an unidentified assailant moments after the 41-year-old prime minister, a former soldier who took office in April, finished his speech to tens of thousands of people gathered in the centre of Addis Ababa.

A witness saw Abiy whisked away by guards. Another witness told Reuters the assailant with the grenade had been wrestled to the ground by police before it exploded.

Health Minister Amir Aman said one person was killed and 154 were wounded, with 10 of them in critical condition.

Addressing the nation on television shortly after the blast and still wearing a green t-shirt he was handed at the rally, Abiy said the attack was an "attempt by forces who do not want to see Ethiopia united."

Abiy had promised the crowd in his speech in Addis Ababa's Meskel Square that he would bring more transparency to government and reconciliation to a nation of 100 million people that has been torn by protests since 2015.

Eritrea, which has long been at loggerheads with Ethiopia over a border row that Abiy has sought to resolve, condemned the incident, as did the European Union and the United States.

Abiy took office after his predecessor, Hailemariam Desalegn, resigned in February following protests in which hundreds of people were killed between 2015 and 2017.

Emergency law was temporarily imposed to quell the unrest and was lifted this month.

Despite boasting one of Africa's fastest-growing economies, opponents say the benefits have not been shared fairly between ethnic groups and regions in the country, which has been run by the same ruling coalition for more than quarter of a century.

Abiy has travelled around the nation, promising to address grievances and address political and civil rights.

After Saturday's blast, the prime minister's chief of staff wrote on Twitter: "Some whose heart is filled with hate attempted a grenade attack."

"All the casualties are martyrs of love & peace. HE PM sends his condolences to the victims. The perpetrators will be brought to justice," Fitsum Arega wrote.

The US embassy in Addis Ababa said: "Violence has no place as Ethiopia pursues meaningful political and economic reforms."

Rally organiser Seyoum Teshome told Reuters he saw five people injured in the blast. "It was a grenade. Someone tried to hurl it to the stage where the prime minister was," Seyoum said.

As well as promising economic reforms, Abiy stunned Ethiopians this month by saying he was ready to fully implement a peace deal with Eritrea that was signed in 2000 after a two-year war. For years, Ethiopia refused to implement the deal, saying it wanted more talks.

The stalemate led to a military build up and sporadic clashes on the border between Ethiopia and Eritrea, which seceded from Ethiopia in 1991 after a long war of independence.

Under the 2000 peace deal, Ethiopia is required to cede the border town of Badme to Eritrea. But war veterans in Badme and ethnic Tigrayans along the border oppose the peace initiative, with some town residents saying they will not leave the town.

Eritrea's ambassador to Japan, Estifanos Afeworki, wrote on Twitter that his nation "strongly condemns the attempt to incite violence" in Addis Ababa, calling the rally a "demonstration for peace".

Ethiopia's ruling EPRDF is made up of parties representing the country's four major ethnic groups. Abiy hails from the Oromo ethnic group, making up roughly a third of the population.

Oromos, along with the Amhara ethnic group, led street demonstrations against the government since 2015 that began as protests against a development plan around the capital and which opponents said the state was using to grab land. Protests broadened to cover other political and economic demands.

In another of Abiy's major policy shifts, the prime minister has said Ethiopia would open its state-run telecoms monopoly and state-owned Ethiopian Airlines to private domestic and foreign investment, both moves would loosen the state's grip.