Authorities in Addis Ababa on Monday banned flights in Benishangul-Gumuz region, where the massive Grand Ethiopian Renaissance Dam (GERD) is being built.
Officials cited security reasons behind the closure of that region's airspace amid unresolved agreement between Ethiopia, Sudan, and Egypt on the use of the waters of the Nile and the dam itself.
"The ban was imposed after consultation with the Air Force and other relevant government and security bodies," Wosenyeleh Hunegnaw, the Director-General of the Ethiopian Civil Aviation Authority told the media.
As a result, he said, commercial or passenger flights or any other types of flights will not be allowed to fly through the area near the vicinity of the dam.
"Such restrictions are common in the international arena to ensure a country's security," Mr Wosenyeleh said.
"Ethiopia has also imposed such restrictions to ensure the safety of the dam," he added.
However, he said that only those with a special permit may be allowed to fly in the restricted airspace.
In an interview with the state-run Ethiopian News Agency, Ethiopian Air Force Commander Brigadier General Yilma Merdasa said that the army is fully prepared to prevent any enemy attack targeting the Nile dam.
The air force is armed with fighter and patrol jets that can stay on the air for more than four hours to defend any enemy actions, he said.
"The Ethiopian Air Force is providing 24-hour air surveillance to the country's airspace and particularly for the Renaissance Dam."
"Any threat of an airstrike against GERD is not a concern for Ethiopia," the military official said citing the country's current air defence capabilities.
It is not clear whether there is a threat of an airstrike and if that is why the airspace restriction has been imposed.
The latest development comes two months after Ethiopia began filling the reservoir while dispute with Sudan and Egypt over its filling and operation remains unresolved.
Khartoum and Cairo fear that Addis Ababa's $4.8 billion mega dam will eventually diminish their historic water share from the Nile River.
Addis Ababa, however, argues that the project, which would be Africa's largest hydropower generator, will not have any significant harm on the two downstream countries.
Ethiopia further argues that the hydroelectric power plant, being built some 30 kilometres from the Sudanese border, will ease the severity of deadly flooding in Sudan.
The Africa Union (AU) brokered round of talks among Ethiopia, Sudan and Egypt ended in August without any major breakthrough.
The three parties are yet to negotiate on the most outstanding issues - rules for filling, particularly during drought season and on the annual operation of the GERD.