The present study focused on simulation of the cascade reservoir operation to optimize the available water for hydropower production, irrigation, environmental flow and flood control in Blue Nile Basin. Parameter Efficient semi-Distributed Watershed (PED-W) model was calibrated and validated at daily basis from 2000-2009 and 2010-2014 respectively. The model predicts river flows of the major rivers; the river flows of the major rivers were simulated for the Lake Tana Basin Later used as input for HEC-ResSim model for reservoir modeling. HEC-ResSim model development with the establishment of HECResSim watershed setup followed by development of reservoir network and finally simulation was done. The model was set up using four scenarios and simulated through three alternatives of hydropower reservoir operation rule. This was based on the current projects operation, and future likely development projects implementation period. From the model result obtained, the annual inflow to Lkae Tana reservoir was estimated to be 5.6 BCM. From the simulation result of Lake Tana, if all the planned development occurs on average 2.78 BCM yr-1 of water supplied to irrigation schemes of 48337 ha command area. But, the Lake water level was lowered by 1.99m in scenario 4. This would cease irrigation, hydropower as well as navigation in the Lake Tana. On the other hand; GERD hydropower project was not affected by the proposed likely development projects under the scenarios. The new reservoir operation rule selected for modeling of the cascade dams/reservoirs operation increased the average energy production of the designed reservoir operation systems of the basin by 27 %. From the simulation of cascade reservoirs operation, Hydropower power guide curve operation rule was selected to optimize the basin’s available water. It is suggested that incorporating all the planned development projects future impact on the cascade reservoirs operation and reservoir sedimentation works too.