Land use conflicts are situations of competition and potential disagreement between two or more land use types over the use of a scarce resource. This study was carried out to investigate the land use conflicts and their impacts on the livelihood of smallholder farmers in Yilmana Densa Woreda, West Gojjam Zone, Ethiopia. The study used the data collected using Household survey, field observations, Key informant interview (KII), and Focus Group Discussion (FGD). In addition, secondary data that obtained from the Woreda land, agriculture, and livestock resources office were used. Descriptive statistics were used to analyze the data. The results of the study revealed that there is a significant shift from natural cover into managed agro-systems, which is attributed to the increase in both human and livestock pressure. In this regards, 21 years, the aerial coverage of forest, bush lands and grasslands declined by 22.4%, 8.7%, and 5.5% per annum, respectively. On the other hand, settlement, cropland, and woodland expanded by 30.4%, 1%, and 1.2% per annum respectively. This shows that most of the areas previously covered with forest and grasslands are mostly shifted to the rapidly expanding settlement, eucalyptus tree and farmland. Cropland expansion due to the rapid population growth, landlessness, grazing land encroachment and market value were the major causes for the land use shift. The results of the study also revealed that there is serious land use conflict between grazing land, farmland and eucalyptus plantation that affects the stability and sustainability of the livelihood of smallholder farmers in the study area. In addition to the land use conflict, due to the excessive use agro chemicals and the rise in its price, the revenue from crop production is very minimal. However, the smallholder farmers in the study area are not well aware of the long-term effects of the land use conflicts on the sustainability of agriculture and the environment in the long run.