Watcrshcds, especially in the developing worl d, are increasingly being l11anageci forrnpoverty alleviation as wel l as for environl11ental conservation objectives for rain fedrnagricu ltura l systel11. The l11ajor challenges of rural developl11ent in Ethiopia includingrnDelanta Woreda are land degradation, low agricu ltural productivity and rural povert y,rnwhich are interconnected: In order to break these intertwined probl el11s, cOl11 l11u nity basedrnilllegrated watershed developl11ent is practiced. Of course, this pract ice broughtrnopportu nities for livelihood il11provel11ent of rural poor but its susta inabil ity is arnchal lengi ng one. Past watershed studies fai led to consider key success racto rs ofrnwatershed development [Such as environmental , economic, technological, technical,rnsocial, insti tutional and physical). Therefore, the overal l objective of this study is torninvest igate the main chal lenges and opportunities of integrated watershed developmentrnwith the eye of sustainab le rural li veli hood perspecti ve. Both qu al itative and quantitativernresearch Â·l11 ethods were employed to gather and analyze data. Specifical ly, questionnairernsurvey, focus group di scuss ion, key informant interview, field observat ion and review ofrnpertinent second ary data sources were utilized to generate the data. The key findi ngs ofrnthe study reveal that the l11aj ority of natural resources have been improved in thernwatershed because of the phys ical SWC and its technologies pract iced in the area.rnFcollol11 ical ly, the household benefited from food- for- work; however, there were alsornchallenges. Because of the investments on activities of income generati ng were low andrnnot concurrently performed with SWC, the investment on physical SWC structures hadrnnot immediate economic return. Institutional ization of watershed development and socialrnnetwork were not given adequate attention in practice and challenging the sustai nabi lityrnof the community-based watershed development. On the other hand, agricultu ralrnactivi ti es became an opportu nities for " iable option of the households, if there werernadequate access to irrigation, agricultural inputs & technologies. Therefore, access or therncommunit ies to capacity buildin g and input technologies with socializing andrninstitut ionali zing the watershed development should be done not an option, butrnimperative for susta inable li ve lihoods.rnKey words: watershed, susta inable development, asset, li ve lihood