Prime Minister Abiy Ahmed has won international praise for his reformist agenda since coming to power in April, including allowing the return of exiled opposition figures.
But his mandate has been marked by ethnic violence, mainly between the Oromo community and other minority groups in several parts of the Horn of Africa nation.
"The objective of the Commission is to maintain peace, justice, national unity and consensus and also reconciliation among Ethiopian peoples," Fana reported on its website.
It said the commission would also identify the reasons for disputes and violations of human rights.
Tesfaye Daba, president of the parliamentary commission for peace and foreign affairs, told Fana the commission will investigate abuses and make proposals to the parliament on how to make amends.
According to the UN Office for the Coordination of Humanitarian Affairs, at least 2.4 million people have been displaced inside Ethiopia by intercommunal violence.
Around one million people were forced from their homes after violent clashes between Oromo people and the Gedeo ethnic minority in the south after Abiy came to power this year.
Ethnic clashes have overshadowed Abiy's reforms, which include the planned privatisation of public companies, the release of jailed dissidents and journalists and a peace accord with neighbouring Eritrea.
Rights groups have for years accused Ethiopian security forces of abuses, mainly against suspected members of rebel groups opposed to the EPRDF ruling party.