The increasing rate of urbanization in Oromia Special Zone Surrounding Finfine, Sululta townrnas a result of a combination of natural population increase and migration to town. This studyrnaddresses the effect of urbanization-induced expropriation on the socio-economic andrnphysical environment of the peri-urban environment. To achieve this aim, the studyrnsampled 203 selected households using random sampling. In addition, the study soughtrnfurther information from key informants, FGD, and observation. Quantitative and qualitativerndata was collected from the households using a structured questionnaire. The quantitative datarnwas analyzed by SPSS software. While, the qualitative data was analyzed by descriptive andrnnarrative techniques. The study revealed that Sululta area is experiencing rapid urbanizationrndue to its proximity to Addis Ababa city. This rapid urbanization of Sululta town has led tornincrease in demand for land and increased informal land market. As a result land use andrnland tenure of the surrounding farmers has changed drastically, with both positive andrnnegative effects on the physical environment, cultural practice and social relationship, andrneconomic lives of the farm community. Some of the positive effects of urbanization identifiedrnby the sample respondents include availability of road infrastructure; school, market and easyrnaccess to banks.The negative effects were loss of agricultural land, environmental pollution;rn(inappropriate solid waste disposal, lack of efficient drainage system, bad odor and aestheticrnvalue disturbance), forest degradation, and unemployment to the immigrants. These effects havernin-turn led to livelihood diversification and new livelihood strategies among the Sulultarncommunity. The study recommends that there is a need to undertake an integrated andrncommunity-driven urban planning framework for the Region and other emerging urban centers.rnKey words: Effect, Expropriation, Peri-urban, Socio economy, Sululta Town, Urbanization,rnPhysical Environment.