The transformation of natural vegetation into farmland has greatly contributed to increased soil erosion and sediment yield in Ethiopia, especially in the Guder watershed within the upper Blue Nile basin. This study evaluates how sustainable land management (SLM) practices have influenced land use and land cover (LULC) changes, soil erosion, and sediment yield from 1990 to 2023. Landsat satellite images from the years 1990, 2007, and 2023 were analyzed using supervised maximum likelihood classification to detect LULC changes, while the InVEST model was utilized to estimate soil erosion and sediment yield. Results show that soil erosion increased from 97.81 tons per hectare per year in 1990 to 108 tons per hectare per year in 2007, largely due to the expansion of agricultural activities. However, by 2023, erosion rates dropped to 67 tons per hectare per year, a decline attributed to conservation measures implemented through the Green Legacy initiative. About 9,100 hectares of land with slopes greater than 12% remain highly susceptible to erosion. Sediment yield was highest in agricultural and bare lands, and lowest in forested regions, with significant sediment buildup occurring in the lower parts of the watershed. SLM activities such as the construction of bunds, terraces, trenches, and check dams, along with efforts in afforestation, reforestation, and establishing protected area exclosures, have been essential in reducing erosion and improving the resilience of the ecosystem.