Police said several thousand people were displaced after the Dire Dawa River burst its banks and swept through homesteads, causing untold damage.
Over the past two years, flooding has afflicted large areas of eastern and southern Ethiopia, killing hundreds of people and displacing hundreds of thousands of others.
Ethiopian security forces, aid workers and residents, who scoured for survivors and bodies, said thousands more have been displaced in the latest disaster.
Scores of others were reported missing in the Addis Ketema, Genfele, Coca Cola and Aftessa areas, which neighbour the township.
The floods have displaced thousands of Dire Dawa’s residents.
Residents say a heavy downpour hit Dire Dawa city, some 500 km east of the Ethiopian capital Addis Ababa, in the early hours of Saturday.
“I opened the door, and the water burst in, forcing me to scape to the rooftop from where police rescued me, but my house and property were destroyed,” said 45 year old Abay Baheru.
The country's Disaster Prevention and Preparedness Office said it had so far provided food for at least 2,000 flood victims as the search for survivors went on.
Flooding often hits low lying areas in Ethiopia during the June to September rainy season.
Residents said the casualties of the floods were mainly women and children.
Many of them are said to have been swept away while they were sleeping in poorly constructed shacks along the river bank.
"Most of the people in the village known as the 'Coca Cola' area were in bed when the floods hit the area,” a witness told Agence France Presse.
The search for more bodies is going on with the help of the army and local people," the witness said.
Hoping against hope
Survivors are hopeful the missing might have escaped to higher grounds when the floods hit.
"We are waiting and hoping that some people might have fled from the area to save their life in the middle of the night. Otherwise, it would be a disaster to many families and friends," one survivor, Adugna Lema, told AFP.
The heavy rain pummelled the area for more than an hour and a half, causing the River Dire Dawa that passes through the town to burst its banks and flood in the region in the early morning.
Witnesses said the floods destroyed more than 100 homes, markets and shops, and swept away livestock and vehicles.
Last year, at least 200 people were killed and more than 260,000 displaced when heavy rains pounded the same region, which lies close to Ethiopia's Somali state.