Land use/land cover change is a complex phenomenon that has serious environmental, economic and social impacts on rural livelihoods. As such, it is important to investigate and understand the causes which play major roles in land use change and its impacts on livelihood of the communities. This study was intended to investigate the impacts of land use/land cover change on the income of the communities in Dedo woreda. The study involved both satellite remote sensing and socio economic data to achieve its objective. For mapping land use/land cover, three time series satellite images: thematic mapper (TM), enhanced thematic mapper plus (ETM+) and operational land imager (OLI) were used for the years 1984, 2000, and 2017 respectively. Five land use land cover classes namely; cultivation land, dense forest, light vegetation, grazing land, and settlement area were clearly identified for the study. Supervised image classification method has been employed using maximum likelihood classification method using ERDAS 2015 Software. Additionally, socio-economic assessment was conducted by using questionnaires, key informant interview and focus group discussion to investigate the driving forces of land use/land cover change and its impact on livelihood of the communities. Survey questionnaire was administered for 110 systematic random sampling selected households. Twelve participants were selected for focus group discussions and ten respondents for key informant interview. The land use trend analysis results revealed that during the last three decades, cultivation and settlement lands have increased by 15.7% and 0.34%, while dense forest, light vegetation and grazing lands have decreased by 9.2%, 4.95% and 1.9%, respectively. In different extents, dense forest, light vegetation and grazing land were converted to cultivation and settlement land. As the study explored from socio-economic data, population growth, expansion of agricultural land, intensified timber harvesting and construction wood, Ineffective natural resource conservation policy enforcement and change in livelihood mechanism were the main causes of land use/land cover change in the woreda. Whereas Land degradation, soil erosion, forest degradation and climate change are identified as the main effects/ products of land use/land cover changes that affect the crop production and income of local communities. Therefore to minimize the effects of land use land cover change, effective and strong natural resource management and utilization policy have to be implemented by woreda’s forest and natural resource conservation office with the participation of local communities and the regional government to insure the sustainability of proper utilization and use of natural resources.