The Oromo and the Amhara make up about 60% of the population. They complain power is held by a tiny Tigrean elite.
Violence has intensified since last Sunday when at least 55 people were killed in clashes between police and protesters at an Oromo festival.
Hundreds have died in months of protests, human rights groups say.
Tens of thousands have also been detained, they say.
Declaring the state of emergency, Ethiopian Prime Minister Hailemariam Desalegn said in a televised address: "We put our citizens' safety first. Besides, we want to put an end to the damage that is being carried out against infrastructure projects, education institutions, health centres, administration and justice buildings."
The state of emergency will last for six months.
BBC World Service Africa editor Mary Harper says the violent protests are the most serious threat to Ethiopian stability in a quarter of a century.
Source: CIA World Factbook estimates from 2007
The protesters have been attacking foreign companies, she says, threatening Ethiopia's reputation as a growing economy, ripe for international investment.
The details of the state of emergency remain unclear, but she adds that protesters have already shown they will not back down when faced with force.
Many roads into and out of the capital, Addis Ababa, are blocked by protesters.
The protests since last November are for manifold reason, and include:
In the most recent unrest in Oromia, at least 55 people were killed in a stampede.
Opposition activists blame the police for causing panic at the annual Ireecha celebrations - a traditional Oromo religious festival. The government blames "anti-peace forces" demonstrating in the crowd.
Police fired tear gas to disperse protesters angered at their handling of the event, witnesses told the BBC.
Protesters say violence by the security forces led to the stampede, but the PM denied security forces had opened fire.
Correspondents say that while the ruling coalition has some solid achievements to show for its 25 years in power, it has been unable to manage the transition from being a secretive revolutionary movement to running an open, democratic government.

Daly replaces lock Courtney Lawes in the only change from the squad that beat Italy.
"Elliot Daly has impressed in training and is now ready to be part of the matchday 23," Jones said.
England won their opening two matches and top the table, while Ireland lost to France and drew with Wales.
Daly, 23, has played four times for England Saxons and also represented England at under-18 and under-20 level.
Ireland could also bring a debutant into midfield, with Ulster's Stuart McCloskey in contention for a first cap if fitness-doubt Jared Payne is ruled out.
Backs: Mike Brown (Harlequins), Danny Care (Harlequins), Elliot Daly (Wasps), Owen Farrell (Saracens), George Ford (Bath Rugby), Alex Goode (Saracens), Jonathan Joseph (Bath Rugby), Jack Nowell (Exeter Chiefs), Anthony Watson (Bath Rugby), Ben Youngs (Leicester Tigers).
Forwards: Dan Cole (Leicester Tigers), Jack Clifford (Harlequins), Jamie George (Saracens), Dylan Hartley (Northampton Saints), James Haskell (Wasps), Paul Hill (Northampton Saints), Maro Itodje (Saracens), George Kruis (Saracens), Joe Launchbury (Wasps), Joe Marler (Harlequins), Chris Robshaw (Harlequins), Billy Vunipola (Saracens), Mako Vunipola (Saracens).
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Ethiopia has declared a state of emergency following months of anti-government protests by members of the country's two largest ethnic groups.
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Wasps centre Elliot Daly is set for his England debut after being named in Eddie Jones' 23-man squad for Saturday's match against Ireland.