Soil erosion is the deterioration of soil by the physical movement of soil particles from a given site and a cause for land degradation. The study carried out an assessment of the extent of soil erosion in Holeta watershed by delineating the micro watersheds and studying the perception of the farmers on the impact of soil erosion on their socio-economic conditions. In order to achieve an over view on the erosion status of the study area and to identify potential areas where effective erosion protection measures might be useful, erosion risk assessment was carried out using farmers’ perception, earth fill dams and RUSLE Model analysis. The multinomial logit model was used to study the identification of major socioeconomic and physical factors influencing soil erosion. The farmers perceive soil erosion and land degradation mainly by yield variability, change in soil color and appearance, occurrence of stony and pebbles followed by rill, sheet and gullies formation. To estimate a spatially explicit soil erosion risk in the study area, Digital Elevation Model (DEM) and Landsat TM image were used with the RUSLE model. The results of the study revealed that the total amount of potential soil loss in the Holeta Watershed is about 16,417.30 tons per year. The erosion risk map of the studied watershed revealed that 20.3 % of the area has low erosion risk status,55.9 % of area moderate and 23.8% of the area high erosion risk status. The problem of environmental deterioration will become one of the most serious problems in future. Based on the study results it was recommended that the micro/sub-watersheds having large rate of erosion should be given first priority during the introduction of intensive and well designed integrated watershed management interventions in the study area. Keywords: Soil Erosion risk; Farmers’ Perception; Earth fill dam, RUSLE; Holeta watershed,