The purpose of the study was to assess the perception and challenges of prospective teachers towards school-based teaching practice in the case of Mekelle University, Ethiopia. For this study, a descriptive survey method has been used. The source of data for this study was the Post Graduate Diploma in Teaching (PGDT) students in the academic year of 2018/2019. The total number of populations in the study was 142, and out of these 80 of them were selected as a sample by using a random sampling technique. The perception and challenges towards school-based teaching practice, was validated by investigators using five point Likert type scale. The scale was used to generate the required data. The data collected from the study participants were analyzed quantitatively. The findings of the study reveal that: (1) prospective teachers have positive perception towards the role of school-based teaching practice in promoting their pedagogical skills as well as subject knowledge; (2) prospective teachers were less satisfied with the collaborative work and feedbacks, they had got from their respective mentors during the school-based teaching practice; and (3) even though school-based teaching practice in the case of Mekelle University has considerable challenges, the most serious problems were practicing period was short, lack of transportation fare on the part of student-teachers, lack of adequate school facilities, and lack of cooperativeness among the University. Based on the findings of this study some recommendations are given on how to improve students' perception and challenges such as: (1) the Ministry of education should provide enough finance for transportation of student-teachers and to realize school facilities in the school; and (2) the University should arrange a proper orientation for student-teachers mentors and tutors to use efficiently means of conferences and discussion before they go for teaching practice.