Watershed degradation is the greatest challenge in the highlands of Ethiopia, promoting interestsrnin the intervention of watershed based management approach to avert land degradation and tornenhance people’s livelihoods. Given this strategy, a wide range of watershed managementrnprograms have been implemented in different parts of Ethiopia for several years to solve thernproblems. However, the effects of watershed management program have not been well examinedrnand documented. To this end, the objective of this study was to explore the state of watershedrnmanagement program and people’s psycho-social conditions, participation and adoption of thernwatershed management practices and to investigate the effects of the management program onrnsocio-ecological and livelihood in Rebu watershed of the upper Gibe basin, southwest Ethiopia.rnTo address these, a total of 304 sample households (145 program participants and 159 nonparticipant households) were randomly selected from three program participant and threerncounterfactual sub- watersheds across various topographic settings. Household survey, keyrninformant interviews, focus group discussions and personal transect observations were employedrnto collect data. A wide range of data analysis tools employed such as descriptive statistics,rnlogistic regression, multivariate and ordered probit model and propensity score matchingrnmethod. Results of state- of the -art indicated that although, watershed development program hasrnbecome the primary objective of the policy and development plans of the country and there arernstrong efforts in the implementation, the emphasis still stresses on the attainment of economicrngrowth rather than environmental concern. Top-down approach of planning the watershedrndevelopment is still dominating. Empirical results of study indicated that local communities werernwell aware of the problems of watershed degradation and outcome of mitigation measuresrndespite its variation in different topographic settings and for watershed program participants.rnExposed stone, gullies and rills and tree root exposure were major indicators of soil erosion,rnwhile crop yield decline and soil cultivability decline were for diminishing soil quality.rnCultivation of steeper slopes, deforestation and poor land management practices were perceivedrnby farmers as the major causes of watershed degradation. The ecological benefits were perceivedrnhigher in the upper topographic areas, while the socio economic benefits were in the middle andrnlower areas. The overall community participation index value of 43.4 % showed moderate levelsrnof participation. Soil bund, grass strip cultivation with soil bund and compost were thernmajor watershed management practices adopted. Estimates of the propensity score matchingrnindicated that the existence of a positive additional significant livelihood assets value of 24.8 %rnfor program participants compared to non-participants suggesting the need of up scaling thernprogram in to the areas not covered. There is also a positive association between importantrncomponents of watershed management-perception, participation, adoption and livelihoods.rnVarious physical, socio economic and institutional factors affects the perception, communityrnparticipation, adoption of watershed management. Hence, policy makers and planners need tornrecognize heterogeneity in households’ socio economic and topographic specific characteristicsrnin watershed management. It also suggested more participatory and integrated approach need tornbe encouraged to upscale and sustaining of watershed management.