In rural areas of Ethiopia, modern forms of energy are not available. Only less than one percent of the rural population of Ethiopia has access to electricity. However, a number of irrigation dams have been constructed and planned for implementation which could generate and provide electricity to the rural population in addition to its irrigation requirement. Therefore, the aim of this study is to estimate the hydropower potential of Ribb Irrigation Dam, Tana Basin, Ethiopia, by formulated Nonlinear programming models and coding them to solve it, Microsoft Excel Solver and General Algebraic Modeling System (GAMS).The input data used for this study were reservoir monthly inflow, monthly evaporation coefficient (at and bt), monthly irrigation requirement, storage capacity of the reservoir (maximum storage capacity, minimum working storage capacity and dead storage), firm water demand, the maximum discharge capacity of turbine and elevation of storage for flood control. Reservoir Storage-area-Elevation Relationships and monthly storage and release were estimated by using Method of Least Squares.The main results obtained from this study were model storage-area-elevation relationship, monthly hydropower output, power output duration curve and optimal reservoir operation guide curve. From the whole analysis period, the maximum and minimum power generated are 382and 5.5 MW respectively. Whereas the annul Power production is found to be 1664.2MW and the optimal power output of Ribb reservoir could produce an installed capacity of (30.5 and 232.13) MW at excedence probability of (100 and 8.33) % respectively.The results of this study showed that it is possible to produce crucial amount of electric power that is very useful in electrifying the rural community without affecting its irrigation purpose by applying systems engineering as a planning tool. .It also shows balanced solutions between the two conflicting ideas (storage for flood control and storage for power generation).