Lake Hawassa watershed is characterized by decades of deterioration with mismanagement of natural resources. Hence, the current study was aimed at assessing the magnitude and transformation patterns of land use land cover categories over the last 45 years, the major drivers of land use land cover changes and the environmental implications of land use land cover dynamics in Lake Hawassa Watershed. The study triangulated data from Landsat images (1972, 1992 and 2017), focus group discussions, interviews and farmers' lived experiences through household survey to evaluate the change and examine the underlying factors and its implications. The land use land cover change detection results revealed significant conversion from shrubland, woodland, and forest to built-up, bare land cultivated land and agroforestry. The proportion of cultivated land and agroforestry increased from 24.2% of the watershed in 1972 to 62% in 2017. These two land uses have gained large parcel of land from naturally vegetated land covers. Overall, about 74.34% of the watershed experienced changes in land cover in 45 years. The changes were driven by proximate and underlying drivers. The identified drivers were expansion of agricultural activities, urban and infrastructure expansion, wood extraction, biophysical factors, demographic factors and land tenure policy. Consequently, the natural resource base of the watershed is degrading. We concluded that unmanaged conversions of land covers were affecting the natural vegetation base and hydrology of the watershed. Hence, it was suggested that integrated lake watershed planning and management has a paramount importance in maintaining economic and ecological benefits.