BackgroundAs the Human Immunodeficiency Virus (HIV) rapid testing services expanded to reach the global target that 95% of people living with the virus will know their status by 2030, ensuring the quality of those services becomes critical. This study was conducted to assess the performance of HIV Rapid testing at sites in health facilities that were enrolled in the Rapid Test Quality Improvement Initiative (RTQII) in Ethiopia.MethodsCharacterized HIV proficiency testing (PT) panels of Dried Tube Specimen (DTS) were prepared, verified, and distributed to testing sites from August to December 2019. In addition on-site evaluation of HIV testing sites (HTSs) was conducted using a checklist to assess testing conditions. For proficiency testing, the study included 159 HIV testing sites (HTSs) in 41 Health facilities (HFs) in five administrative regions and two city administrations. The collected data was analyzed by SPSS version 20 and chi-square test was applied to identify the association between acceptable performance and contributing factors. Testing sites with 100% PT score as well as conducting the test with adherence to the National HIV Testing Algorithm were considered acceptable.ResultsThe overall acceptable performance (100% PT score with the correct algorithm followed) was found to be 62% while 12% scored 80% and 11% scored between 20 and 60%. The rest 15% were not considered as acceptable due to failure to adhere to the National HIV Testing Algorithm. Testing sites that participated in External Quality Assessment/Proficiency Testing schemes have shown better performance than those that did not participate with 70% and 56% performance respectively (p = 0.057).Supplementary InformationThe online version contains supplementary material available at 10.1186/s12879-023-08285-x.