The East African country declared a state of emergency this month after sometimes deadly anti-government protests demanding wider freedoms.
Businesses have been a target over suspected government links, hurting Ethiopia's reputation as one of Africa's best-performing economies.
Sebeta Mayor Ararsa Merdesa told The Associated Press today that some people have been released but many remain detained and under investigation.
Ararsa says only 50 of those arrested were local and the rest came "to cause the violence."
"Over the last 11 months, security forces have killed hundreds of peaceful protesters, arrested tens of thousands and mistreated those in detention. This has led in part to the anger that has spilled over in recent weeks," said Felix Horne, Human Rights Watch's lead researcher on Ethiopia.
"Deploying more of those same abusive security forces to restore law and order is unlikely to improve long-term stability," Horne said, instead urging the government to address protesters' grievances and allow space for opposition voices.