Sedimentation is a leading global problem that affects the environment and dams by reducing the live storage capacity of reservoirs and the life expectance of dams. Hence, prioritizing watersheds according to the risk of soil loss is crucial for extending the useful life of dams and reservoirs. The objectives of this study were to assess sediment flow in the Genale Dawa-3 reservoir, identify subbasins that are prone to soil erosion, and evaluate the impact of different management practices on minimizing sediment yields by using the Soil and Water Assessment Tool (SWAT) model. The SWAT model was calibrated and validated by observed streamflow and sediment data based on the SUFI-2 algorithm by SWAT-CUP, and its performance was assessed. The model simulated the average annual sediment yield; the input to the reservoir was 16.83 ton/ha/yr for the period of 1990–2015. From a total of 31 subbasins, 12 were categorized from high to very severe (11–60 ton/ha/yr) sediment-yielding subbasins and selected for sediment management. The simulated scenarios showed that the average annual sediment reductions at critical erosion hot spots in subbasins after the application of filter strips, soil/stone bund, terracing, and contour farming were 35.03%, 66.54%, 80.88%, and 53.11%, respectively. Therefore, this study concluded that reducing sediment yield by implementing terracing in critical areas at risk of soil erosion was more effective than other soil conservation measures. Overall, this research can help planners and decision-makers to implement appropriate soil conservation measures in the most erosive subwatersheds in order to extend the useful life of the Genale Dawa-3 hydropower dam and reservoir.

Watershed hydrology comprehension is fundamental to the efficacious management of water resources and the formulation of sustainable solutions. This research used the soil and water assessment tool (SWAT) to analyze the hydrological dynamics of the Genale Dawa‐3 dam watershed, to advance sustainable water management strategies. Model calibration and validation were performed using sequential uncertainty fitting (SUFI‐2) within SWAT‐CUP, and performance was assessed through various statistical measures including R ² , NSE, PBIAS, and RSR. The findings demonstrated a robust correlation between observed and simulated streamflow during both the calibration and validation stages. The statistical analysis revealed that there was significant agreement between the observed and simulated streamflow in terms of R ² (0.79, 0.75), NSE (0.74, 0.72), PBIAS (−2.8, 2.1), and RSR (0.57, 0.56) during calibration and validation. Evapotranspiration was found to account for 64.66% of precipitation loss, while surface runoff, groundwater flow, and water yield were each responsible for 12.62%, 9.47%, and 32.28% of the annual water balance, respectively. A yearly water balance analysis revealed that evapotranspiration was the primary route of precipitation loss, followed by surface runoff, groundwater movement, and overall water yield. The study estimated the total water potential of the watershed to be 2.45 BMC. Notable spatial heterogeneity in water balance components was observed across subwatersheds, attributable to variations in pedological characteristics, land use/land cover patterns, topographical features, and precipitation distribution. The elucidated hydrological processes provide a robust empirical framework for water resource practitioners and policymakers to formulate and implement evidence‐based, sustainable management strategies.