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Purpose The Angereb dam in northwestern Ethiopia was commissioned in 1997 to serve as a domestic water supply for 25 years. However, its sustainability is being threatened by rapid sedimentation. The overall objective of this study was to understand reservoir sedimentation in this tropical highland watershed and to propose its mitigating strategies that would contribute to the improved planning and management of reservoirs in similar regions. Materials and methods The reservoir's surface area and capacity at every 1-m elevation difference were generated based on point (x, y, z) data collected by bathymetric surveys in 2005 and 2007. Rates of reservoir capacity loss and sediment yield during were calculated and the life of the reservoir was projected. Then an identification of sediment-mitigating strategies was performed by employing a multicriteria decision analysis technique. Results and discussion The annual total capacity loss during was estimated at 4.02%, 3.16%, and 3.03%, respectively, and the relatively decreasing trend is attributed to the impact of limited soil and water conservation practices implemented in the watershed at the later stage of the dam project. Comparison of capacity-elevation-area curves between 2005 and 2007 showed that sediments were distributed across the reservoir floor, though most (68%) deposition occurred below the dead storage level. The actual life of the Angereb reservoir was projected to be 3 years, which means that the remaining dead storage capacity will be silted up completely by the end of the rainy season in 2011. The rapid sedimentation is due to both technical and environmental factors. Conclusions Both curative and preventive sediment management strategies were proposed: (1) removal of sediment using machinery or manual labor and promoting use of the sediments for farmland reclamation, and (2) implementation of specific area-targeted watershed management interventions. In the short-term, the reservoir life can be extended by raising the intake level of the pump suction pipe. For sustainable dam and reservoir design, top priority should be given to building a reliable sediment yield database, development and adoption of appropriate methodologies for predicting sediment yield, and capacity building of designers.