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This study analysed long-term land-use and land-cover change (LUCC) in a highland watershed covering an area of about 154 km² in the Blue Nile basin of Ethiopia. Two sets of panchromatic aerial photographs (1957 and 1982) and a Landsat TM image (2001) were the main input data from which three land-use and land-cover maps were produced by employing geographical information systems/remote sensing techniques. These data were complemented by some socio-economic data that were generated by using household survey, key-informant interview and group discussion methods. The results show that in regard to land-use and land-cover, the major change has been the reduction of areas under natural vegetation cover and expansion of open grassland, cultivated areas and settlements. Over the four and a half decades considered, areas of forest and dense tree cover and shrub grassland decreased by 64 and 6%, respectively. Forest and dense tree cover experienced the greatest change; from accounting for ∼9% of the total area of the watershed in 1957 to only ∼3% in 2001. In general, much of the de-vegetation occurred between 1982 and 2001. Cropland and rural settlement showed a small but consistent increase between 1957 and 2001. Riparian vegetation decreased during the first period, but increased almost to the same level during the second period by gaining land from the other land-use and land-cover types. The observed LUCCs were driven by a combination of proximate and underlying causes. These include increasing demographic pressure and associated demands on environmental resources, widespread rural poverty and inadequate management of common property resources owing to poorly defined ownership arrangements. There is a need for short-term and long-term strategies to ensure sustainable land management and agricultural development in the watershed.