The general objective of this study was to compare the psychological well-being of orphan and non-orphan children in Addis Ababa and to explore the conditions or situation that could promote the psychological wellbeing for the orphan. Both quantitative and qualitative methods were employed to achieve the research objectives. Three groups of respondents, recruited from three randomly selected schools in Yeka Sub-city of Addis Ababa, participated in the study. The participants were: 120 orphan children, 120 non-orphan children, and 3 representatives of charity clubs in the selected schools. The orphan and non-orphan children were selected using systematic random sampling technique while the three representatives were purposively taken as a sample. A demographic questionnaire, a psychological wellbeing scale and interviews instruments was administered. Data from the quantitative survey were analysed using percentages, t-test, and Pearson correlation. The qualitative data were analysed using inductive thematic analysis. Using mean split technique on the psychological wellbeing scores of orphan and non-orphan children, orphan had low psychological wellbeing whereas the non-orphan had high psychological wellbeing. T-test for group mean difference on psychological wellbeing revealed that orphans were found to have a significantly lower psychological wellbeing as compared to the non-orphan children. Results from Pearson correlation analysis revealed that grade level was significantly and positively correlated with psychological wellbeing whereas parental status was significantly and negatively correlated with psychological wellbeing. Gender and age were not significantly related with psychological wellbeing. From the analysis of the qualitative data, encouraging the orphan’s individuality and autonomy and enhancing their self-esteem, and respect and care by adults were identified as the major themes that could promote orphan children’s sense of well-being.