Most people who live in rural areas are highly dependent on shared access to natural resources including land, water, and forests for their food requirements and livelihoods. However, land degradation remains one of the biggest environmental problems worldwide. Therefore, this study proposed to develop integrated watershed management strategies for sustainable resource utilization in the Kalte River watershed. To achieve this, the SWAT model was simulated for 31 years (1992–2022), calibrated and validated at Wajifo and Humbo hydrological stations to determine the sediment and runoff from the watershed, highly sediment erosion-vulnerable part of the watershed was identified from the result of the model and the best watershed management practice was suggested for the study watershed. In total, 87,920 tons/year of sediment are yielded to Lake Abaya from the Kalte River watershed. The sediment yield was reduced by terracing at 64%, strip cropping at 59.32%, grassed waterway at 54.06%, and contour planting at 47.93%. Therefore, the higher efficient management method in the Kalte River watershed is terracing. The watershed managers and scientific community are beneficiaries of the output of this study. Watershed managers and decision-makers can make use of the information to help them choose appropriate watershed management strategies and ensure sustainable watershed management.