Soil erosion is the most serious problem in the Ethiopian highlands and gully erosion is the principal source of soil erosion and sedimentation for on-site and off-site areas. Gully erosion has high negative impact on both cultivated area and crop production. One of the most interesting aspects of this study is quantifying the contribution of gully erosion to overall soil and nutrient loss from the one of upland watershed in the Blue Nile Basin. The study was conducted in the 483.6 ha of Chenetale watershed located to the South of Bahir Dar, Amhara region, Ethiopia. A nested watershed with size of 104.6ha was gauged for flow and sediment data collection. The objective of the study was to estimate the contribution of gully erosion to total soil and nutrient (N and P) loss from the watershed. The total soil loss from the watershed was monitored at the out-let of both main and nested watershed. Both dissolved and particle associated nutrient lost was computed in 2015 and only dissolved nutrients was analyzed in 2016 for this paper. The gully soil loss was computed measuring the gully dimension before and after the rainy period and digitizing gully plane area from the Google earth images taken in 2005 and 2013. The estimation of total gully area from 2005 and 2013 Google earth images indicated that it was 1.84 ha and 3.43 ha, which was about 1.8% and 3.3% of the area of the study watershed, respectively. The analysis result shown that soil lost from the gully was nearly doubled between 2005 and 2013. The total soil loss from the outlet and nested watershed was 6.43 ton ha-1 yr-1 and 2 ton ha-1 yr-1, respectively in 2015 and 7 ton ha-1 yr-1 and 9 ton ha-1 yr-1, respectively in 2016. Soil los from the gully was high in 2016. There was rainfall amount and distribution difference with 2015. A total of 9.23 kg ha-1yr -1 N and 0.4 kg ha-1yr -1 P from the outlet and 3.03 kg ha-1 yr-1 N and 0.14 kg ha-1 yr-1 P from nested watershed were lost in 2015 and 0.67 kg ha-1 yr-1 dissolved N and 0.08 kg ha-1 yr-1 dissolved P from outlet and 0.945 kg ha-1 yr-1 dissolved N and 0.37 kg ha-1 yr-1 dissolved P was lost from nested watershed in 2016. Sediment associated nutrient loss from nested watershed was less since its contribution is from gully. Soil loss due to gully erosion is high at the top part of the watershed than the bottom and the soil lost from the upslope part of the watershed is deposited on the down slope part of the watershed before reaching at the outlet.