The main objective of the study was to examine challenges and prospects of bamboo forest in Baso-Kulano watershed, Southwestern Ethiopia. Mixed research design was employed. In this case using purposeful sampling technique three kebeles were selected as sample kebeles. From these kebeles, 125 sample household heads were proportionally selected as sample size using systematic random sampling technique. To supplement and bridge data from household survey, focus group discussion, and key informant interview and field observation were utilized. Collected data revealed the complex system of root networks of bamboo forests enabled an excellent mechanism for arresting soil erosion (25%) and buffer against climate change (18.6%). But due to farmland and settlement encroachment, lack of awareness and wasteful utilization practices, obsolete management practices and ineffective policy enforcements at grassroots level bamboo forests are under sever.