The potential of the land or its productivity has deteriorated from time to time due to run off, topographic variations, slope of the land, intensive cultivation, farming on steep slopes and deforestation. This study tries to investigate the challenges and opportunities of community based sustainable watershed management in Kiraregn watershed. The objective of this study was to assess thechallenges and opportunities of community based sustainable watershed management in Kiraregn watershed. The data were collected from both primary and secondary sources. The primary data were generated from 188 sample household heads, three focus group discussions and eight key informant interviews in three kebeles. The collected data were analyzed using both quantitative and qualitative data analyses methods. The quantitative data were generated through questionnaire, that was filled by the sample household heads were analyzed using descriptive statistics. Whereas, information gathered using field observation, focus group discussion, and interviews were analyzed and transcribed in the form of narration and used to supplement quantitative data. Lack of awareness of local communities, population pressure and shortage of farmland, drought and poverty, weakness of the current community leaders and less-fairness of implementing watershed management bylaw, etc were identified as major challenges of community based sustainablewatershed management. While the perception of the local community to conserve natural resources and their attitude towards sustainable watershed management, the involvement of governmental and nongovernmental parties and accreditation of formal law are identified as opportunities. From the result of the study it was possible to conclude that watershed management can play a significant role to enhance youth’s employment through conserving natural resource. Accordingly, it is recommended that Governmental and Non-GovernmentalOrganizations should concern on the benefit of community based sustainable watershed management practices and to manage the existing practices.