This assessment evaluates the potential for sustainable tourism development in Eritrea’s coastal Massawa and Dahlak Archipelago as an economic opportunity that can contribute to improved livelihoods, heritage promotion and natural conservation efforts. A total of 472 surveys were administered with local communities from Massawa and Dahlak; more than 200 surveys with local, diaspora and international visitors to these target destinations; and a series of key informant interviews with local and national level tourism stakeholders, to assess the potential for developing both a sustainable and competitive tourism sector. The assessment finds that the overall potential for Eritrea to develop a sustainable tourism industry in Massawa and the Dahlak Archipelago is substantial. The findings demonstrate that the destinations are not only endowed with significant natural and cultural heritage sites that are rated as high potential tourism assets, but also communities which have responded with a positive inclination towards tourism led economic growth. Resident and local stakeholders identify an increase in the tourism industry with positive gains in employment generation, development of the service sector, infrastructure and improved social welfare benefits. Visitors rank Massawa and the Dahlak Archipelago as high potential destinations that are endowed with attractive natural and cultural assets that are appealing to local and international tourist travel markets. However the research also finds that the development of a sustainable tourism sector in Massawa and the Dahlak Archipelago faces a number of branding, infrastructure and policy oriented challenges. These challenges necessitate a concerted effort from a diverse network of national and international stakeholders to develop an enabling environment that promotes the emergence of a successful and vibrant industry.