The construction industry faces challenges, such as schedule overruns, cost overruns, poor quality, and safety issues. Lean construction is a valuable concept for waste reduction and improving project performance. This study explored the impact of lean construction principles on contractors' project performance in Ethiopia. Using a quantitative method and simple random sampling technique, 159 respondents from construction companies were selected. This study introduced partial least squares structural equation modeling (PLS-SEM) in the study area. The results showed that process/technology lean principles, people/culture lean principles, and integrated project delivery variables had a direct positive impact on contractor performance. There was also a significant indirect relationship between process/technology-lean construction principles and project performance with a complementary partial mediation effect. However, no significant indirect associations were found between people/culture-lean construction principles and project performance through mediation of onsite construction waste management. The study used FIMIX-PLS to test robustness and detect hidden heterogeneity at non-critical levels. The findings provide researchers and practitioners to identify the influences that are critical for contractors’ projects performance improvement, and that results in the best possible outcome.