This study attempted to analyze the process of land use change through informal landrntransactions and subdivisions in Kolfe Keraniyo sub-city of kebele 04, Selti Area which isrnlocally known as Selti sefer. The study also explores the major impacts of informal urbanrnexpansion on the social and physical environments of the city in general and in the studyrnarea in particular. I have used both primary and secondary data for the purpose of thisrnstudy. Aerial photographs of the study area of 1994 and 2002 at scale of 1:8000 andrn1:2000 respectively, IKONOS image of the area (2007) and Google Earth image (2007)rnwere used. Both qualitative and quantitative data were used and systematically analyzedrnusing GIS and Remote Sensing techniques as analytical tools. In addition to these, thernparticipatory mapping technique was used for the change of the area for the last sevenrndecade in the study area. The analytical tools found out to be efficient to analyze land usernchange, pattern analysis and the extent of informal land conversion from agricultural usernto urban land. The empirical finding revealed that the built up of the area between 1994rnand 2002 was increased by 122.3 hectare which was 135.1 per cent. Similarly, the roadrn(gravel and footpath) of the area increased by 4.7 km which was 20.4 per cent. On therncontrary, agriculture land and forest were decreased from 159.8 and 12.2 hectare in 1994rnto 27.3 and 11.3 hectare in 2002 which was 82.9 and 7.9 per cent respectively. Accordingrnto this finding informal settlement in the area is a phenomenon seen after 1994 due tornsocio-economic and political reasons. The chronic shortages of housing, lack of access tornurban land through the formal channel, poor and inefficient land management, lack ofrninstitutional capacity and administrative instability found out to be the major cause forrnrapid informal land subdivisions. My empirical observation revealed that the informalrnsettlements in the selti area lack the basic urban social and environmental services. Thernarea gets some of these services at best informally or uses its own mechanisms to copernwith the problem. As a result, the area is facing serious environmental problems due tornlack of water, road, and sanitation services.rnKey words: - Land use/cover, Informal settlements, Environment