Soil erosion in Dire dam watershed is a widespread problem causing soil and organic matter losses and hence loss of fertility and reduction in crop yield. In addition to these on-site problems, it also produces important off-site effects, like downstream sediment depositions in fields, floodplains and water bodies, water pollution, eutrophication and reservoir siltation. This research has, therefore, been carried out to evaluate the soil erosion risk in the watershed. The research integrates the Revised Universal Soil Loss Equation (RUSLE) with a Geographic Information System (GIS) to quantify the potential soil erosion risk. Rainfall data, soil data, DEM data and satellite image were used as input data sets to generate RUSLE factor values. Raster calculator was used to interactively calculate potential soil loss and prepare soil erosion risk map. The result showed that the potential annual soil loss of the watershed ranges from 0.00 to 263.25 ton/ha/yr and the mean annual soil loss rate is 58.3ton/ha/yr. Of the 9 sub-watersheds, four (47.5%) were predicted to experience annual soil loss of more than the watershed’s average (58.3 t/ ha/yr), whereas five sub-watersheds (52.5%) estimated annual soil losses were less than the average. The result also showed that very high soil loss (80.71 t ha/yr) is observed in subwatershed B and four sub-watershed (B, E, A & G) fell under very high and high soil erosion severity classes (60.43 – 80.71 t/ha/yr). Based on average annual soil losses, the sub-watersheds were divided into four priority categories for conservation intervention. As a result the critical sub-watersheds which are under very high and high category were selected and recommended to be intervened for conservation measures to reduce on-site soil loss and their off-site effects. Key Words: Dire Dam, Soil erosion risk, Watershed, RUSLE, GIS