Amanuel Gebremichael and Mesud Mohammed gave the home side a 2-0 lead at half-time before the ever-reliable Getaneh Kebede sealed the victory for Ethiopia in the second half.
The result sees Ethiopia move to six points and onto third spot in the group.
Côte d’Ivoire and Madagascar retained first and second place after playing to a 1-1 draw in Antananarivo.
Ethiopia took the lead in the 13th minute, when Gebremichael got the opener with a fantastic shot from inside the penalty box after some quick interchange of passes with Shemeles Bekele.
Mohamed made it 2-0 for the hosts two minutes before the break.
This was when a quickly-taken corner-kick saw Bekele provide his second assist of the evening, teeing up his teammate who struck a brilliant curling effort beyond the goalkeeper.
The Ethiopians kept the hunt in the second half.
They were rewarded for their hard work with 20 minutes left, partly thanks to some shambolic defending by Niger.
Trying to play out from the back, Yusif Douda attempted a short pass back to his goalkeeper and Kebede pounced inside the penalty box before unleashing a ferocious shot past the goalkeeper.
In Antananarivo, Madagascar found themselves trailing in the fourth minute when Franck Kessie converted from the penalty kick spot after Jeremy Morel handled as he tried to clear away a cross.
In spite of trailing 0-1, Madagascar however proved a match for the Ivorians, even as they could not create many chances to trouble the visitors’ backline.
Côte d’Ivoire had a chance in the 42nd minute when Kessie released Nicolas Pepe through into the area but his shot was blocked.
A minute before the break, Pepe curled in a beautiful cross into the penalty box, but Ibrahim Sangare miscued the shot a few yards from goal.
The intensity went up in the second half and, within five minutes of the restart, Madagascar were back on level terms.
It was from a peach of a goal from skipper Ibrahim Amada who was brought in to start after coming off the bench in the first leg.
The midfielder struck a beautiful shot into the far left after being teed up by Morel, who made amends for the earlier penalty kick.
The match blew into a full contest, each trying to get into the final third for a goal.
Kessie had a brilliant chance in the 63rd minute, but his shot after a beautiful half-turn inside the penalty box went inches high.
With a quarter of an hour left, Kessie had another go at goal, this time his rasping shot from range finger-tipped onto the bar by the Madagascar goalkeeper.
None of the two sides could get a goal as they settled for a point each, with the final round of matches next year set to hold all the drama.