<p>Entrepreneurship serves as a catalyst for innovation, economic expansion, and job creation on a global scale. However, research focusing on the institutional factors influencing university students’ entrepreneurial intentions remains scarce, particularly in the context of underdeveloped economies. This study examines the effect of the institutional environment (regulative, cognitive, and normative) on entrepreneurial intentions, with the mediating roles of perceived desirability and feasibility, among undergraduate students in Ethiopia—a setting where related research is limited. Using a quantitative survey design, data were collected from 287 graduating students at Addis Ababa Science and Technology University (AASTU), the country’s premier institution for science and technology. Correlation analysis demonstrated positive relationships between all institutional environment factors and entrepreneurial intention. Regression results revealed significant effects for the normative and cognitive environments, as well as for desirability and feasibility, while the regulatory environment showed an insignificant direct effect. Sobel tests confirmed that desirability and feasibility significantly mediated the relationships between institutional environments and entrepreneurial intentions. These findings underscore the crucial role of desirability and feasibility in fostering entrepreneurship among students. Overall, this study extends existing literature by exploring an underrepresented regional context and offers valuable insights for policymakers, educators, and stakeholders aiming to strengthen entrepreneurial ecosystems in underdeveloped countries.</p>