State Department spokesman Ned Price speaks at the State Department in Washington. AP
The state of emergency was declared on November 2 after TPLF fighters seized two crucial towns about 400 kilometers (250 miles) from Addis Ababa.
It triggered mass detentions of ethnic Tigrayans in Addis Ababa and elsewhere, sparking condemnation from rights groups including Amnesty International.
US State Department spokesman Ned Price said lifting the emergency was "another important step by the Government of Ethiopia to pave the way for a peaceful resolution of the ongoing conflict."
"We urge that this move be immediately followed by the release of all individuals arrested or detained without charge under the state of emergency," Price said.
"The end of these detentions will facilitate an inclusive and productive national dialogue," he said.
In December, Amnesty International said Tigrayan civilians had been attacked and killed in the conflict, and that "cores" were detained where they faced "life-threatening conditions including torture, starvation, and denial of medical care."
It alleged that Ethiopian government-aligned forces had subjected Tigrayan women and girls "to rape, gang rape, sexual slavery, sexual mutilation and other forms of torture."