Despite their restriction, smallholder farmers have been continuing growing Eucalyptus globulus in the cultivated land in the central highland of Ethiopia. Literature has shown controversial issues against E. globulus. Therefore, the objective of the study was to investigate the compatibility of E. globulus in the smallholder farmers’ land use system. Soil samples were collected from five different land uses and analysed for selected physical and chemical properties. The socioeconomic contribution of E. globulus was collected through household surveys from 110 households. Analysis of soil showed that organic carbon (OC), total nitrogen (TN) and cation exchange capacity (CEC) were significantly higher (P<0.05) under E. globulus compared to the cultivated land. The survey results also showed that the largest proportion (58%) of households was interested in growing E. globulus because of its multiple uses. About 83% of households responded that E. globulus help them to attain food security through increasing the purchasing power of smallholder farmers to buy agricultural inputs and food. This study has substantiated the role of E. globulus in the land use system of smallholder farmers. Most of the soil fertility indicators were better under E. globulus. The present finding reveals that E. globulus degrade the soil seemingly difficult to generalise. Growing E. globulus must be promoted under appealing land use to enhance smallholder farmers’ livelihoods. Removing E. globulus from the land use system may jeopardise the food security situation of many households.