Environmental flow assessment and maintenance are relatively new practices for the water sector, especially in developing countries. The concept of environmental flow assessment is new to Ethiopia; so far no studies have been conducted, despite the fact that the country is endowed with many natural lakes and rivers. The main objectives of the research were to determine the environmental flow requirements downstream of the Lake Tana and to investigate the associated social, economic, and environmental impacts of the Chara Chara weir. To accomplish these objectives both the survey data and historic records of hydrological data were used. To analyze the hydrological data the desktop reserve model (ver.2) were employed. The research indicates that, in order to maintain the Abay River at an ecological category of C class, requires an average annual total environmental flow allocation (sum of low and high flows) of 1197.977 MMC, which is 30% of the Mean Annual Runoff. The model results indicate that the absolute minimum dry season flow required to maintain the aquatic organisms in the vicinity of the Tis Issat Falls is 5.271m3/s. However, the actual minimum dry season flow in the area was found to be 2.754 m3/s, (i.e. just 51.9 % of the proposed minimum instream flow requirement). The Water Stress indicator over the falls was calculated to be 1.99. This implies that the too little water goes to the falls, which is overexploited by the near by hydropower station. Furthermore, the study investigated both the adverse and beneficial impacts of the Chara Chara weir on the downstream villages. The provision of environmental flows is not only a scientific question but also a social, economic, and political issue. Therefore, establishing an environmental flow regime will involve many different actors, from the highest levels of government to local communities. This study provides sound options that could be used to improve the current situation and to alleviate the environmental problems in the downstream of Laka Tana; especially in the vicinity of the Tis Issat Falls, in order to maintain the aquatic biodiversity and to keep the visual amenity of the Falls for tourists without, unduly compromising the energy out of the hydropower station.