Land-use and land-cover (LULC) changes can impact the hydrological conditions such as land surface coefficient, runoff, infiltration, and hydrographic characteristics of the watersheds. This study investigates the changes in LULC and its impact on water resources of the Wabi Shebele basin using Soil and Water Assessment Tool (SWAT) and a Separation method. Surface and groundwater parameters in northwestern part of the basin; and soil and surface parameters in the eastern highland and southern lowland part of the basin are the most sensitive parameters identified for water production. Out of ten LULC types that exist in the basin, three of them (i.e., cropland, grassland, and bare land) showed growth while two LULC types (i.e., forest and woodland) shows a significant decrease in the past four decades from the 1980s to 2010s. The coverage of cropland was increased by 48.63% while forest and woodland were decreased by 49.14% and 14.76% respectively in the period. Streamflow simulated during this period indicates increases in those watersheds shows significant cropland increases and forest coverage decreases particularly in Wabi at Dodola, Maribo, Robe, and Erer watersheds. Flood indices (i.e., AMAX, SMW, SMSp, and SMSu) calculated from simulated daily streamflow under different LULC map indicates increasing in the middle and northwestern watersheds up to 1.83% and 0.44% respectively. The separation method performed to estimate the impact level of LULC change impact change on flood discharge shows that LULC change has comparable impact level with climate change on streamflow and flood values particularly in middle part of the basin.