Characterizing the socio-economic systems in integrated watersheds is to identify and prioritize production constraints for designing appropriate R&D interventions. The random sampling method was used to select 81 households, and both qualitative and quantitative data were collected. Formal and informal surveys were conducted to gather information about the socioeconomic and institutional issues. Descriptive statistics and diversity indices were used for data analysis. According to the results of the study, agriculture is the largest source of income in the study areas, followed by off-farm activities such as daily labor, handcraft and pension. The dominant crops grown in the watershed are maize, teff, and haricot bean, respectively. Livestock rearing is also the major means of livelihood in the study area. About 37%, 19% and 17% of the farmers owned cows, sheep and goat, respectively, in the Edo watershed. The watershed is characterized by a dynamic farming system. For instance, about 63% and 32% in the introduction of new varieties and declining in soil fertility changes over the last decade were recorded, respectively. About 58% of the households indicated that there has been a decreasing and irregularity in rainfall, while 20% of the households reacted that there is the emergence of animal and plant diseases, increasing temperature, and decrease in river flow and springs over the last 10 years in the watershed. The baseline study also identified that water erosion, deforestation, and over-tillage are the major causes of the degradation of natural resources in the watershed. In general, this study concludes that land degradation and biodiversity loss are serious concerns in the watershed. Awareness creation and strengthening capacity of rural communities on integrating crops, livestock, and natural resource management technologies for effective soil and water conservation measures should be enhanced for sustainable livelihood improvement.