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Abstract Inadequate conservation practice affects the sustainable production of agricultural watersheds due to erosion and fertility decline. Understanding soil erosion and implementing site-specific conservation practice could enhance agriculture-based rural development. The study was aimed to document soil erosion problem and soil and water conservation effort. The specific objectives of this study were to assess soil erosion severity, practices to reduce erosion, and determinants of the decision to reduce erosion. Data were collected by interviewing 198 farm household heads, undertaking four focus group discussions, and assessing rill erosion in 10 farm fields in Morayo and Wacho sub-watersheds of southern Ethiopia. Descriptive statistics and binary logit model were applied to analyze the data. Results indicated that many of the farm households, 63% in Morayo and 83% in the Wacho sub-watershed, perceived moderate to severe soil erosion, which is characterized by big rills and small gullies on the farmlands. Rill densities of 231.4 m ha−1 and 84.1 m ha−1 in the Morayo and Wacho sub-watersheds were observed, respectively. The estimated annual soil loss due to rills was 61.2 and 23.4 Mg ha−1 in the Morayo and Wacho sub-watersheds, respectively. The soil erosion from rills alone exceeds the expected tolerable soil erosion (11 tons ha−1 year−1). Due to erosion, about 90% of farmers perceived farmland degradation as described by a progressive decline in crop yield. Farmers used to practice traditional techniques to reduce erosion and government introduced conservation measures such as soil and stone bunds. However, many farmers did not use well-promoted conservation measures such as bunds, which could have negative impact on long-term erosion control effort and sustainable implementation of the conservation options. Among the assessed explanatory variables, educational level, farm distance from home, slope of the cultivated land, and frequency of extension contact were significantly affected (p |