Characteristics of watershed were not well investigated as global also in Fincha, Ethiopia. Fincha watershed is the most erosion prone area in the highlands of Ethiopia towards to Fincha dam.Therefore, the aim of this study was toanalysisFincha watershed characteristics based on land use/cover, soil type and slope classification and to identify soil erosionpronearea using Arc-GIS and Arc-SWAT model.Accordingly, nine major land use/covers were identified. Those were:- bush land, dominantly cultivated, moderately cultivated, irrigated land, grass land, water bodies, swamp area, urban and woodland open. From these most part of the catchment was under cultivation with 67.677% of the total area. In the same way, the major soil types identified were: - chromic luvisols, chromic vertisols, dystric cambisols, eutric cambisols, eutric nitosols, eutric regosols, haplic phaeozems, humic cambisols and water. Cambisols were covered the highest percentage, 39.98% area of the catchment.Subsequently, average annual values of estimated soil lossfrom the catchment was231.2 ton/ha.The identified prone erosion areas were sub-basins 1, 8, 11, 14, 17 and 20. It was very critical for environmentalists, hydrologists, agricultural experts, watershed managements and concerned decision makers for sustainable water resource projects and environmental protection system. Therefore, further detail investigation and appropriate watershed management practices should be given for these subbasins.