Reservoir sedimentation is a serious moment of surface runoff and soil erosion with large environmental and economic implications. Deposition of sediment in reservoirs reduces the storage capacity of the reservoirs and affects the operation and stability of the dams. The main objective of this study is to assess runoff & sediment yield at Laga Dadi reservoir and its catchment and identify hotspot areas of the watershed in runoff & sediment yield. The outlined objective is attained by a physical based hydrological model Soil and Water Assessment Tool (SWAT). Daily runoff and sediment data from 1994-2009 were used in this study. Data from 1994-2003 were used for calibration and 2004-2009 for validation. Following the successful calibration and validation of the model on the study area, runoff and sediment yield have been estimated. The annual runoff volume generated on the watershed was estimated to be 654.5 mm as it is known that SWAT Generate Runoff in mm. The total simulated mean annual Sediment yield loading from Laga Dadi watershed simulated is 6.73 ton/ha/yr. The total mean annual sediment yield that is drawn from Laga Dadi watershed predicted by SWAT model is found to be 138146.71 tons. The model prediction verified that about 17% of the watershed around the dam site has erosion potential area contributing very high sediment yield exceeding the tolerance limit. Hence, the researcher recommends conservation and environmental protection in upper catchments, tributary rivers site and on the spot, area shall be done continuously.