Since the Quaternary, extension and magmatism in the Main Ethiopian Rift (MER) have been mainly focused into narrow magmatic segments that have numerous volcanic centers and caldera collapses that offer favorable conditions for the occurrence of geothermal resources. However, the subsurface structure of the volcanic systems (0–10 km) and their link to the distribution of shallow geothermal resources remain unclear. To investigate the role of subsurface structures on the occurrence of these resources, we conducted gravity and magnetic studies combined with geological constraints within the Tulu Moye Geothermal Prospect (TMGP), one of the current geothermal prospects in the central MER associated with caldera collapses. Gravity data from the Global Gravity Model plus (GGMplus 2013) and ground magnetic data transformed into residual and derivative maps reveal that shallow magmatic intrusions occur under the volcanic centers (Tulu Moye, Bora, and Bericha). Our interpretation along with recent magnetotelluric model suggests that only the intrusion beneath Tulu Moye is currently magmatically active and includes partial melt, consistent with it being a primary heat source for the geothermal system. A new caldera formation model is proposed where the TMGP hosts an older large caldera (about 25 km diameter) within which there are several smaller nested caldera systems associated with the Bora, Bericha, and Tulu Moye volcanoes. Along with existing geologic, seismic, and magnetotelluric studies, our gravity and magnetic analysis indicate the interaction between NNE-SSW (rift-parallel) and NW-SE (cross-rift) trending faults, along with shallow magmatic intrusions and caldera systems, suggesting that such a large geothermal system is possible under these conditions.