Land Use and Land Cover (LULC) is generally considered the main factor influencing the hydrological processes and sediment output of Ethiopian semi-arid watersheds. Focusing on the Fincha watershed, the current study applies the Soil & Water Assessment Tool (SWAT) model to evaluate how LULC changes affect the watershed hydrological dynamics. Utilizing stream flow time series data acquired from 1986 to 2008, the model was calibrated and validated. Standard statistics such as coefficient of determination, Nash-Sutcliffe simulation effectiveness, and per cent bias were used to assess the model's performance. To investigate the effect of LULC changes on watershed hydrology, six LULC scenarios have been produced, representing three past (1989, 2004, 2019) and three future (2030, 2040, 2050) reference conditions. The results show an increase in surface runoff in the past, and a similar tendency is expected for the next three decades. On the contrary, lateral flow and groundwater flow are occasionally decreasing. At the sub-watershed scale, areas where surface runoff has dropped significantly point to an increase in groundwater, indicating an inverse relationship between surface runoff and groundwater. The present analysis shows that the ongoing expansion of agricultural land, urban areas, and intermittent logging of forest cover may be the reason for the rise in surface runoff, and the decline in groundwater and lateral flow.