Integrated watershed management practice was taken as the basic operational unit to rehabilitate degraded watershed and improve agricultural productivity in the study area. However, its economic analysis was rarely evaluated. Therefore, this study assessed economic analysis of an integrated watershed management practice at Horuwwa watershed in the Gombora district. Data were collected from 117 farm households which were selected from the major watershed through random sampling. The multiple linear regression analysis result revealed that six independent variables were significant in explaining the factors affecting the farmers’ household income in the watershed management practices. These variables were gender, age, farm size, labor, off-farm, irrigation and livestock unit. The chi-square test result of the variables gender (χ2 = 4.082) and land size (χ2 = 4.572) were found to be statistically significant at the 95%. Annual household income of downstream beneficiaries of the watershed was significantly higher than upstream beneficiaries. The most determinant factors for household annual income were irrigation access, TLU, farm size and off-farm income. The average contribution of income generating activities of IWSM practices in household annual income was 41.3%. Thus, IWSM is not only effective in increasing crop and livestock production but also it has high contribution in household annual income. Therefore, the result of the study suggests working on raising the awareness of farmers’ about the economic benefits of an integrated watershed management practices and to design a strategy to diversify their livelihoods and further investigation should be carried out.
