Inadequate water resources supply among different water users can be viewed both from social andrneconomic dimension. The Borkena Catchment is affected by recurrent draught due to climate change inrnevery eight to ten years. To sustain the water security of the catchment understanding the groundwaterrnsurface water interaction and management is necessary. The general objective of this study is tornanalyze the surface and groundwater interactions; specifically to estimate the recharge, to identify thernregional and local ground water in the system and to asses if the borkena river is gaining or loosingrnriver. ArcSWAT was applied to understand the water balance components of the study. The SWATrnmodel result was calibrated by using SWAT CUP SUFI2 algorithm with daily stream flow data rangingrnfrom 2000-2007 and validated with stream flow data ranging from 2008-2014. The groundwater andrnmanagement parameters are more sensitive (groundwater revap coefficient, groundwater delay,rnthreshold depth of water in the shallow aquifer vital for return flow to occur (GWQMN), deep aquiferrnpercolation fraction (RCHRG_DP)). The model goodness of fit was evaluated with coefficient ofrndetermination and the Nash-Sutcliffe Coefficient on a monthly basis for both calibration and validationrnperiods and resulted 0.68 and 0.66 for calibration period and 0.64 and o.63 for validation periodsrnrespectively. After calibration the ArcSWAT model was conducted and the result was good. From thernSWAT model the annual rainfall of the whole catchment is 1017.5mm. The recharge calculated isrnfound 12% of annual rainfall, surface runoff is 62% of the annual rainfall and evapotranspiration isrn58% of the annual rainfall. Based on the produced hydrogeological cross sections, hydrogeologicalrnmap, and groundwater level map from deep boreholes water level and physico-chemical analysis waterrntypes data, there is groundwater transfer from Abay basin (Gerado) to Awash basin (CombolchaKemisse). The water types at Gerado/Abay basin (KCTVW-01-19) are Na-HCO3-CO3), water type atrnCombolcha/ Awash basin (KCVTW-02-19) is Ca-Na-Ca-Mg-HCO3 and water type at Kemisse/Awshrnbasin (KCVTW-03-19) is Na-Ca-HCO3-SO4 which are similar but due to geo-chemical processesrnevolution of compounds is identified. This indicated that there is regional groundwater flow (transfer)rnfrom Abay (Gerado) to Awash (Combolcha-Kemisse) and from the NW-N-S or Kutaber-Desse tornCombolcha and Kemisse locally. The surface water and groundwater exchange is analyzed based onrnthe boreholes groundwater elevation and borkena river elevation data the positive values in each riverrnand borehole data indicated that there is river water seepage to aquifers and negative values indicatedrngroundwater flows from aquifer to river. The analysis result indicated that 41.66 % is effluent orrngaining river, 36.11 % is influent or losing and 22.22% is effluent or Influent River. This alsornconfirmed with the SWAT-MODFLOW model result for 7448 river cells. A further study to identifyrnRegional groundwater flow from Gerado/Abay to Combolcha/Awash basin and Surface water andrngroundwater interaction using Isotope analysis method is recommended.