The groundwater flow system and mechanism of recharge of different aquifers has been studied using conventional hydrogeological field investigations, hydrochemical and isotope techniques in the volcanic terrain of central Ethiopia. Litho-hydrostratigraphic relationships were constructed from lithologic logs obtained from exploratory drilling of deep boreholes. The result indicates quite complex flow pattern and hydraulic characteristics of the different volcanic aquifers. The analysis of the temporal and spatial variation of water samples from different places revealed clear groundwater-surface water interactions. New evidences have also emerged on the interbasin groundwater transfer. Two distinct regional basaltic aquifers (Upper and lower) were identified showing distinct hydrochemical and isotopic signatures. In the southern part of the study area the upper and lower aquifer forms one unconfined regional aquifer system. In the other hand in the northern and central part of the basin, it appears that the two systems are separated by regional aquiclude forming confined aquifers, in places with artesian wells. The groundwater from the deep exploratory wells (>250m) tapping the lower basaltic aquifer and wells located in the south were found to be moderately mineralized (TDS 400-650mg/l) and with relatively less enriched stable isotope composition. In contrast the upper shallow aquifer has lesser ionic concentration and more isotopically enriched. Evidences from the different methods indicate that there is likely groundwater transfer from the northern adjacent Blue Nile basin to the Upper Awash basin. This has enormous practical implication in finding large groundwater reserve at a greater depth that can solve water supply problems for many cities including the capital Addis Ababa. It will also have important role in finding more regional aquifers along the plateau-rift margins in many areas having similar hydrogeological setup as the Upper Awash basin.