Wonji basin covers a total area of 357 Km2 and has a population of 290,703 out of which 50,000 are sugar estate farm workers. The main source of domestic water in the area is groundwater. Awash river passes in the area dividing in to two equal parts whose water is mainly used for cattle drinking and industrial purposes. Meteorological and hydrological data were used to establish and calculate water balance in the Wonji basin. Groundwater recharge was estimated to be 557.75 x 106m3 per year. Different methods some with many parameters and others with few were checked side by side to obtain more realistic actual evapotranspiration. Their average gave 702 mm mean annual actual evapotranspiratin. The mean annual rainfall is 785 mm in the area. Based on joint data along with mathematical treatment and pumping test results, lithological units have been characterised into different permeability groups. From the results of water chemistlY and compositional diagrams, 5 groundwater systems with some interconnections were identified. Direction of regional groundwater flow of the basin is from west to east. Two horizons of cold water of deep aquifers occur at an average depth of 120 and 170 in the region. Using temperature of thermal springs, depth of geothermal water circulation has been calculated to be 242 m below the surface. This has been also confirmed by the drilling data of borehole 26. However this depth could vary up to 400-500 III under Gadamsa caldera rim, Boku ridge and Koka escarpment high lands. The estimated groundwater demand in the basin ranges up to 4.7xI06m3 , which is Illuch less than yearly recharge. Fluoride concentration showed zonal variability from low lying parts of the basin to the high lands of the study area corresponding to compositional variation of the rocks and thermal activity. Concentration of total dissolved solids in the groundwater, exhibited positive relation with irrigated sugar plantation. Pollution from inorganic fertiliser (NO,) is not however, observed under sugar cane farm. This is suggested to be due to high groundwater inflow dilution from Koka reservoir. Subsurface water in the region is generally of good quality for drinking purposes. But some dug wells and hot springs are of non promising quality for irrigation.