Land degradation and frequent drought have been identified as the most serious problems that threaten the sustainability of agriculture and economic growth in Ethiopia. Watershed management was taken as the basic operational unit to rehabilitate degraded watershed and improve agricultural productivity. The Recent year WSM practice of Ethiopia has abled to alleviate physical intervention. This in turn has becoming a means for poverty alleviation initiatives and income generating activities. Hence, the major concern of this study was to analyze the impact of watershed management on household income and crop productivity in Enebse-Sarmider worereda Amhara regional state. To meet this objective, a total of 231 sample households constituting 130 from untreated watershed area and 101 from treated watershed area were randomly selected from three watershed areas. Both primary and secondary data were collected and analyzed using SPSS version 20 and STATA 13 software. Descriptive statistics with appropriate statistical tests and propensity score matching (PSM) were used to analyze data. The descriptive result shows that watershed management has significant benefit to the target group. The main benefits are cut and carry system, tree/wood production, fruit production, bee keeping, and improvement in water availability and agroforestry. Besides, the study results show that, watershed management has a positive contribution to natural resource conservations, crop-livestock production and productivity and household's income escalation. Results from the propensity score matching shows that developed watershed has statically significant contribution in households' income improvement. This study showed that households that reside in treated area have increased their annual income by 11165.03 birr than untreated households per year. Therefore, in agriculture dependent country like Ethiopia, soil and water conservation is crucial in improving the livelihoods of the rural farm households. However, to realize the intended outcomes, agro-ecology specific technologies that are linked with natural resource management based income generating activities shall be promoted.