Reservoirs are built to manage surface water resources used to balance between water resources and demands. Water in the arid, semi-arid and other climate regions like Ethiopia has available finite, but the demand increases. Hence reservoirs should be optimally operated in this semi-arid area to use water most efficiently. This study was conducted to assess hydrological variability and climate change impacts on the operation of Tekeze hydropower reservoir in Tekeze River basin. In this basin annual and inter-annual climate variability of precipitation and climate change uncertainties are present challenges for water resources planning and management. This study contributed to provide a scientific basis for the changing characteristics of precipitation and streamflow of Tekeze basin. The research is carried out using Mann-Kendall (MK) test and Indicators of Hydrologic Alteration (IHA) to determine the potential trends and variability of rainfall and streamflow. The trend in mean monthly precipitation data shows increasing trends in the South-eastern part of the Tekeze basin whereas decreasing trend in the North-western part of the basin. The streamflow trend analysis also showed a significant increasing trend during wet seasons, in contrast dry season showed a significant decreasing trend. Indicators of Hydrologic Alteration (IHA) used to evaluate hydrologic variables and trends generated from daily streamflow data at Embamadre due to Tekeze hydropower reservoir operation. The significant results in the streams downstream of Tekeze hydropower reservoir had increased minimum flow, decreased maximum flows, decreased rise and fall rates, reduced wet season monthly flow. All these hydro-climatological variability influence Tekeze hydropower reservoirs planning and operation. This would be valuable for the water managers and decision makers to make better decision on integrated water resources management and ecological environment assessment in the future.Assessment of Tekeze River basin water resources undertaken through the application of bias-corrected ensemble COordinated Regional climate Downscaling Experiment in African domain (CORDEX-Africa) Regional Climate Models (RCMs) under Representative Concentration Pathway RCP4.5 and RCP8.5 climate scenarios in the 2020s, 2050s and 2080s used as an input to Soil and Water Assessment Tool (SWAT).This study compares the performance of different bias correction methods successfully, in particular, the result of both precipitation and temperature were greatly improved by the distribution mapping (DM) bias correction. Results showed that an increase in rainfall and temperature in the future would be critical to future inflow in Tekeze hydropower reservoir, with rainfall variability having a more significant impact than temperature variability. For all future time periods, both the scenarios produce moderate increases in annual and seasonal streamflow. Due to the future changes of streamflow which is an input for reservoir planning and operation, climate change scenarios should incorporate into the operation of hydropower dams and reservoirs in Tekeze basin. US Army Corps of Engineer’s Reservoir Evaluation System Perspective Reservoir Model (HEC-ResPRM), a network flow based reservoir system operations optimization monthly model was used to reproduce optimum hydropower reservoir storage, release and water level on Tekeze hydropower reservoir. In current operation, HEC-ResPRM well optimized Tekeze hydropower reservoir and showed an increase in power storage, pool level and release compared to current actual hydropower reservoir operation status. Future optimized power storage in the operational Tekeze hydropower reservoir is expected to increase up to 25% and 30% under RCP4.5 and RCP8.5 climate scenarios, respectively. This result indicates that Tekeze hydropower reservoir operation affected by future climate change. Therefore, it is better to improve this reservoir operation before investing into newly planned hydropower reservoirs in the basin. This analysis shows that integrating hydrological variability and future climate scenarios into optimal hydropower reservoir operation and other water resources planning and development are essential in Tekeze river basin and other river basins projects in Ethiopia. Keywords: Hydrological variability, SWAT, CORDEX-Africa, RCP, Climate Change, HEC-ResPRM, Hydropower, Reservoir operation, Optimization, Tekeze Basin