The main purpose of this study was to explore the practices, challenges and contributions of indigenous knowledge toward the community’s economic development. To this end, a qualitative research approach was employed with a Case study design. Both primary and secondary data were collected. Primary data were collected through interview, focus group discussion, observation and key informant interview whereas secondary data were collected through document review, published and unpublished posts. Among the total community population of (1300), 24 participants were included in the study. 13 participants were selected for interview using a multistage sampling technique in consideration of a varied profession; seven participants were selected for focus group discussion using Purposive sampling and four participants were selected for key informant interview using purposive sampling with frame of experience and elderliness. Narrative analysis was used to make sense of the explored qualitative data. The major findings of the study reveals that the Negede-Woyto community is rich in indigenous practices which contributed to their economic development. However, there were various challenges in using indigenous knowledge for the community’s economic development. Among the most widely practiced indigenous knowledge in the community were found to be fishery, Basketry and papyrus crafts, diving/ corpse finding and stone mason. Whereas the major challenges were found to be lack of resources and raw material; rapid technological changes; challenges related to the market; attitudinal and other challenges. Based on the findings, it was concluded that indigenous knowledge is contributing to the community economic development. However, they are challenging and requires overcoming the rapid changing technologies and the scarcity of resources. Accordingly, based on the finding relevant recommendations were forwarded.