Malnutrition in children under 5 years of age is pervasive in Ethiopia across all wealth quintiles. The objective of this study was to determine the willingness to pay (WTP) for a week's supply of Nutributter® (a lipid-based nutrient supplement, or LNS) through typical urban Ethiopian retail channels. In February, 2012, 128 respondents from 108 households with 6–24-month-old children had the opportunity to sample Nutributter® for 2 days in their homes as a complementary food. Respondents were asked directly and indirectly what they were willing to pay for the product, and then participated in market simulation where they could demonstrate their WTP through an exchange of real money for real product. Nearly all (96%) of the respondents had a positive WTP, and 25% were willing to pay the equivalent of at least $1.05, which we calculated as the likely minimum, unsubsidised Ethiopian retail price of Nutributter® for 1 week for one child. Respondents willing to pay at least $1.05 included urban men and women with children 6–24 months old from low-, middle- and high-wealth groups from four study sites across three cities. Additionally, we estimated the initial annual market size for Nutributter® in the cities where the study took place to be around $500 000. The study has important implications for retail distribution of LNS in Ethiopia, showing who the most likely customers could be, and also suggesting why the initial market may be too small to be of interest to food manufacturers seeking profit maximisation.