The Metropolitan Area of Addis Ababa is currently being supplied with potable water from three main surface water sources. This study picked the catchment of Gefersa reservoir, due to its problems related to erosion, land degradation, land scarcity, and sediment accumulation in the reservoir. The present water supply from Gefersa is about 30,000m3/day. Land Suitability Analysis is a Geographic Information System based process for evaluating the suitability of land for appropriate development options. By the use of parametric method this research has identified suitable trace of land suitable for Agriculture, Livestock Production, Forestry, and Settlement and Other Constructions, giving priority in their stated order, aspiring to lower erosion and soil degradation problems. Finally, out of the 57.54km2 area of the watershed, 46% was suitable for agriculture, 17% for livestock production, 10% for forestry and the remaining 27% for settlement and other constructions. This result compared to the current land use and land cover condition, showed that significant amount of land is currently being used against the suitability of that specific land segment. Since, majority of the population in the catchment is dependent on mixed farming; the study has also evaluated the suitability of the land for the use. As a result, only the southern part of the watershed, i.e. 34% of the total area, was suitable for the purpose of mixed farming. However, the watershed was found to be 100% suitable for agriculture, considering improvements only on the Organic Matter content, soil pH and C:N ratio. KEY WORDS; Gefersa Reservoir, Land Suitability, GIS, Water Supply