The central highlands of Ethiopia are characterized as a region of high rates of land degradation and soil erosion. This study aimed to estimate total amount of soil loss and sediment yield using RUSLE model within GIS environment. LULC maps of 1973–2015 were used to evaluate the impact of land use change on soil loss and sediment yield. Each model parameter and sediment deliver ration was computed by using Williams and Berndt empirical equation. The net soil erosion and sediment yield at the Guder river mouth and soil risk map was estimated for the watershed. LULC dynamic for the study period and watershed have shown that there existed a rapid conversion of vegetated land uses to human modified land uses. The study revealed that the mean soil loss from the watershed ranges between 25 and 30 t/ha−1 yr−1 which accounted 25.8, 28.7 and 30.3 t/ha/yr for 1973, 1995 and 2015 periods respectively. The estimated total soil loss in 1973, 1995 and 2015 periods were 198Mt yr-1, 221Mt yr-1 and 239Mt yr-1 respectively. The mean sediment yield estimated was 6.79, 8.65 and 9.44t ha-1 yr-1 for 1973, 1995 and 2015 periods respectively. The sediment deliver ratio (SDR) of the watershed ranged between 0 and 0.26. The spatial distribution of SDR showed that the highest value was recorded on central and eastern part of the watershed. Prioritizing erosion host spot areas is recommended to rehabilitate degraded lands using suitable soil and water conservation structures.