Area enclosure is emerging as one of the strategies to rehabilitate and restore degraded environments. In this study the roles of area enclosure investigated in comparison to an open adjacent site were assessed for vegetation, soil quality and local livelihoods in one of the highly degraded areas of the Southern wello, Kallu woreda. The main purpose of the stud was to analyze changes in plant diversity, density, soil fertility improvement as well as some of the benefits to local community as a result of area enclosure. Comparative assessment result of the vegetation analysis showed that the density of woody species in the enclosure and open site were 5563 and 3862 individuals per hectare, respectively. A total of fifty woody species, representing 27 families were recorded in the study site. Out of the fifty species, 47 were recorded in the enclosure while 37 were in the open site. A total of 13 species were recorded in the enclosure, which were absent in the open site. Similarly 3 species were recorded in the open site, which were not present in the enclosure. Diversity and density comparison of vegetation is found to be significantly better in the enclosure than in the open site. The soil variable results also revealed that soil organic matter, CECs, exchangeable Ca, soil moisture were significantly improved as a result of the enclosure. Apart from the biodiversity and soil quality improvement, local community has benefited from the enclosure in the form of forage for livestock by cut-and-carry system and farmland protection from clotting with silt and mud from the upper catchments. This has developed a positive attitude by the local community towards enclosure development. This study generally shows that area enclosure is a promising strategy to rehabilitate degraded environments as it is fast, cheap and lenient. However, local community is complaining about the management system, access to resources and benefits. Hence, area enclosure establishment should be done in consultation with local communities from the inception through out its development for sustainability. Key words: Area enclosure; Livelihoods; Soil quality; Southern Wello (Kallu); Diversity; Woody species; Cut-and-carry.