Background: Worldwide, about 50 % of all new cases of HIV occur in youth between age 15 and 24 years. Studies in various sub-Saharan African countries show that both out of school and in school adolescents and youth are engaged in risky sexual behaviors. School-based health education has been a cornerstone of youth-focused HIV prevention efforts since the early 1990s. In addition, peer-based interventions have become a common method to effect important health-related behavior changes and address the HIV/AIDS pandemic. Thus, the aim of this study was to evaluate efficacy of peer education on changing HIV related risky sexual behaviors among school youth in Addis Ababa, Ethiopia. Methods: A quasi experimental study with peer education intervention was conducted in purposively selected four secondary schools (two secondary schools for the intervention and other two for the control group) in Addis Ababa, Ethiopia. Five hundred sixty students from randomly selected sections of grade 11 were assessed through anonymous questionnaires conducted in pre- and post-intervention periods. Pertinent data on socio-demographic and sexual behavior related factors were collected. The statistical packages used for data entry and analysis were epi-info version 3.5.4 and SPSS version 20.0 respectively. Chi-square test and multivariable logistic regressions were used for testing association between peer education intervention and sexual behaviors of students. In addition to testing association between dependent and independent variables, multi-variable analysis was employed to control for the effects of confounding variables. Results: When the pre and post intervention data of each group were compared, comprehensive Knowledge of HIV (P-Values =0.004) and willingness to go for HIV counseling and testing (P-value = 0.01) showed significant differences among intervention group students during post intervention period. Moreover, students in the intervention group were more likely to use condoms during post intervention period compared to students of the control group [AOR = 4.73 (95 % CI (1.40–16.0)]. Conclusion: Despite short follow up period, students in the intervention group demonstrated positive changes in HIV related comprehensive knowledge and showed better interest to go for HIV testing in the near future. Furthermore, positive changes on risky sexual behaviors were reported from the intervention group. Implementing secondary school targeted peer education by allocating appropriate amounts of resources (money, man power, materials and time) could play significant role to prevent and control HIV/AIDS among school youth.