The study was taken place in the farmscape of Dallo Manna district, Southeast Ethiopia aimed to understand the connection between the diversity and carbon sequestration potential of woody species. A total of 45 plots (20 m x 20 m) were established along five-line transects to collect woody species within seven land use systems. A total of 50 woody plant (DBH greater than 2.5 cm) species, belonging to 33 families, were recorded in the farmscape. The most frequently encountered woody species was Vachellia abyssinica, followed by Albizia gummifera, and the most abundant species was Coffea arabica followed by Mangifera indica, and Ricinus communis. The dominant land use in the farmscape of the study area was perennial crop and grazing lands. The study area had an average above ground carbon (AGC) stock potential of 49.21 Mg C ha − 1 and a total of 2460.98 21 Mg C ha− 1. Syzygium guineense, Celtis africana, and Ehretia cymosa, sequestered the highest AGC. Perennial cropland uses showed the highest species richness and diversity and accumulated the highest AGC followed by patches of natural forest. The study highlights the value of farmscapes, which have the potential to be a climate-smart and successful land use strategy by significantly reducing carbon emissions through dense and diverse woody plant communities. Coffee cultivation, which relies on shade trees, plays a particularly important role. The findings suggest that conservation efforts should extend beyond protected areas to encompass Dallo Manna's agricultural lands, promoting biodiversity conservation and climate change mitigation alongside sustainable agricultural practices.