Rural landscapes, particularly those close to human settlements and main roads throughout the highlands of Ethiopia, appear greener than the outfields because of eucalypt plantations. In the study areas, Western Gurage Watersheds/Western Gurageland, located in Central-south Ethiopia, the most common factors for expanding eucalypt plantations are to fulfill the need for household firewood, construction materials, and market demand. The primary purpose of this study is to assess the land use and land cover changes driven by eucalypt plantations expansion over a spatiotemporal perspective and its impact on the environment and livelihood of the communities. Landsat images of 1987(TM), 2001 (ETM), and 2017 (Landsat 8 OLI) were used for detecting LULC changes. Digital image processing operations were completed using ERDAS Imagine 2011 Software. Systematic and purposive sampling methods were employed for household survey data collection by selecting households with eucalyptus woodlots from each Woredaâ€Ÿs Kebeles (sub-districts) list. About 383 questionnaires were distributed and collected from households of the three woredas (districts) of Cheha, Enemorna Ener, and Eza, found in the watersheds. Close- and open-ended questionnaires were distributed to every fifth household that possessed eucalypt wood lots. Focus group discussions, key informant interviews, and participatory observation were employed to supplement the information. The survey data were analyzed using both qualitative and quantitative techniques. Descriptive and dispersive statistics were employed using SPSS Version 20. The results showed that between 1987 and 2017, the area cover of LULC types, namely plantation forest, Enset-based agroforestry, cereal crop, and built-up areas, increased in the study watersheds at the expense of natural forests and grassland. The total natural forest cover declined in the study period (1987-2000) and then increased from 2001-2017 due to the expansion of eucalypt trees on bare land, grazing land, and cereal cropland covers. The drivers of the expansion of eucalypts were socioeconomic and environmental factors. From multiple responses given, households prefer planting eucalypts to indigenous trees because it is fast-growing, profitable, needs lesser labor, needs lower capital, can be used for multipurpose, and coppice itself fast. Respondents rated household income gained from eucalypt second next to enset. Households may continue planting the species, particularly for fuelwood and construction needs, since substituting it with other alternatives seems not feasible shortly and is challenging. Households in the study area have enough knowledge on the environmental impacts of eucalypts after having experience in using the species for many decades. From multiple responses given concerning expected eucalypts driven farmland constraints; all (100%) of the households believed that the shortage of grazing land should become more serious, there will be the reduction of cattle number, the productivity of enset and other crops will be decreased, and the traditional solid attachment the Gurage have with enset shall get loose. They have given more emphasis on the socioeconomic importance of the species, and its environmental externalities gained less attention. Young farmers planted from 1000 to 5000 eucalypt seedlings on lands previously covered with crops. Previous households that benefitted much from eucalypt products are attributable for further expansion by others. This intern resulted in serious land-use competition between wood lots, farmlands, and grasslands/grazing lands. Farmers are aware of the land-use competition, and the resultant impacts of eucalypt trees with other land uses. However, the short-term reward gained from the species overshadowed their opportunities to curb serious land-use competition and plant on ideal sites. To sustain the livelihood and reduce adverse environmental impacts, appropriate management like site selection, tinning (spacing), mixing the species with indigenous trees, and substituting horticultural and cash crops using micro-irrigation schemes for market needs are recommended. Conducting in-depth participatory research and specific policy ratification and promulgation on-farm forestry in general and eucalypt plantation in specific will sustain its wise utilization and curb the observable drawbacks worried from the species.