Footage shows the prime minister, who was wearing a yellow T-shirt with Nelson Mandela and the African continent on it, standing up and looking in the direction of the sound before being ushered away by security guards.
Shortly after the attack, Abiy appeared grim-faced on television to say that “a few people” were killed and that the “well-orchestrated attack” was “cheap and unacceptable.”
Health Minister Amir Aman later tweeted that one person had died of his wounds among the 155 reported wounded.
“Love will win. Forgiveness will win. Killing is a sign of defeat. They failed yesterday. They failed today. They will fail tomorrow,” Abiy said.
Rally organizer Seyoum Teshome told The Washington Post that he saw the attack unfold, and that the prime minister was saved by one of the demonstration’s participants.
“Someone was trying to throw the grenade and then another person touched his hand so he missed the target and the grenade fell without reaching the stage,” he said.
The blast came just as the master of ceremonies was welcoming viewers from abroad and said in English that “this is the day that Ethiopia has become proud.”
The sound of the live broadcast on state television cut after the blast, and people in the crowd could be seen craning their heads in the direction of the sound.
Photos on social media after the attack showed scattered clothes on the ground, a few motionless bodies and people crying.
In a tweet following the attack, Abiy’s chief of staff Fitsum Arega promised that the perpetrators would be brought to justice.
“We will overcome hate with love. Some whose heart is filled with hate attempted a grenade attack,” he said. “All the casualties are martyrs of love & peace.”
In the aftermath of the attack, police scuffled with angry protesters and then cleared the square with tear gas, according to Agence France-Presse.
The Associated Press said that nine police officials were later arrested, including the deputy head of the capital’s police commission, citing state broadcaster ETV.
The man with the grenade was wearing a police uniform, witness Abraham Tilahun told the AP. Police officers nearby quickly restrained him, he said. “Then we heard the explosion.”
Abiy, who was inaugurated in April, has embarked on a string of rapid reforms that have stunned the nation, including releasing tens of thousands of prisoners, replacing key generals in the army, dampening ethnic tensions in the country and promising to liberalize the economy.
The rally was in part to express popular support for the prime minister's reforms, such as peace overtures to its once bitter enemy Eritrea, including promises to give up territory now held by Ethiopia.
The Eritrean ambassador to Japan, Estifanos Afwerki, said his country “strongly condemns the attempt to incite violence” at what he described as the first demonstration for peace in the history of Ethiopia.
Despite the tragedy at Meskel Square, spirits were high elsewhere in the city where crowds streaming away from the hours-long rally were cheering and wearing T-shirts emblazoned with Abiy’s face.