Land degradation, which includes degradation of vegetation cover, soil degradation and nutrient depletion, is a major ecological problem generally in Ethiopia and particularly in the study area. As a response of the ever expanding land degradation, rehabilitation of degraded lands through closed areas has been practiced in the study area. Despite this concern, there are relatively few studies in the study area, which would provide a measure of usefulness of closed areas as one strategy to help prevent decline of soil degradation and thereby increase agricultural productivity. A field study was conducted in the Busuqi and Gubesay Peasant Association of Adaa'a wereda, Eastern Shewa zone, Oromia Region of Ethiopia to assess the effects of area closure on soil nutrients and on gully and sheet erosion. To this end enclosure sites are compared with other land use types (free grazing land) in similar landscape positions for soil fertility buildup, sheet erosion, and gully erosion. Soil samples were collected accross two parallel transects from the three land use types. Status of degradation of different land use types; young Kelala enclosure, free grazing land and old Biyo enclosure, was assessed using SOM, CEC, TN, PH, AP, AK, BD, gully parameters and sheet erosion rate . Degradation Indices were computed for young Kelala enclosure and free grazing land through comparison with the old Biyo enclosure. The rate of soil loss through sheet in the study area was determined using erosion Pins. Five and twenty one year closed areas had significantly (p < 0.05) higher levels for SOM, CEC, TN and AK compared to free grazing lands. The soil physical properties such as bulk density, showed notable variations, particularly due to different land use system. The highest bulk was recorded in the free grazing land, whereas the lowest was in old Biyo enclosure. AK was the most deteriorated soil parameter with values of 35.25 (%) and 47.31(%) for young Kelala enclosure and free grazing land respectively. SOM was the next deteriorated soil parameter with values of 44.05 for free grazing land. TN was the next deteriorated soil parameter with values of 26.92 (%). Among the two land use types selected to be studied, free grazing land was the most degraded one with a degradation index of -150.95% with respect to the old Biyo enclosure. The calculated soil loss using Pin method indicated that there is significant difference (p < 0.05) between Kelala Dalacha closed areas and adjoining free grazing land. Gully density of 14m/ha was recorded in the enclosed side and 28m/ha in the free grazing side, which implies that the sampled farm land bellow enclosure area was severely degraded and sampled farm land bellow free grazing land was very severely degraded. The soil loss by sheet erosion was 0.37 mm /yr and 1.68 mm /yr for young Kelala enclosure and free grazing land respectively. The overall output from the research showed that chemical and physical soil properties in enclosure areas with restoring vegetation are improving that enclosures act as important sinks of water and reduce soil erosion and as such contribute to soil and water conservation. If appropriate interventions are not carried out in the free grazing land for the future, the soil nutrient deplition extent and soil erosion rate would escalate and reversing the process would become difficult Keywords: land use, closed areas, free grazing land, soil nutrients, erosion, Pin, gully density