Hydrological models are becoming more and more widespread, mainly due to their capacity to simulate the stream flow and sediment yield of a watershed. SWAT allows a number of different physical processes. In this study, SWAT used to simulate river flow of Dirma watershed located in the northeast of Lake Tana sub-basin, Ethiopia. The model is calibrated and validated for two-period data, 2005-2011, and 2012-2014 respectively. The SWAT-CUP software module, SUFI2, was used to analyze the calibration, and validation of the model. The SWAT model using SWAT-CUP has given good and adequate results during calibration and validation with the value of R2, NSE and PBIAS as 0.79, 0.86, and 0.76, 0.82 and -24.0, -12.9 respectively, for monthly simulation in the Dirma watershed. The sensitive model parameter identification of the SWAT model showed that soil and slope were the most sensitive parameters. The shallow aquifer for the occurrence of base flow (GWQMN) is the most sensitive parameter, and the result shows soil has a great effect. The calibrated model can be used for further analysis of the effect of watershed characteristics as well as other different management scenarios on stream flow.