This study evaluated changes in land cover in the Chemoga watershed, headwater to the Blue Nile. Two sets of aerial photographs (1957 and 1982) and a multispectral Spot image (1998) were used as inputs to produce 3 GIS-based land cover maps of the area. The results show that during the last 41 years, forest cover increased at a rate of about 11 ha per annum in the 36,400-ha watershed. Woodlands and shrublands decreased between 1957 and 1982 but increased between 1982 and 1998, approximately to their previous levels. Farmland and settled areas gained from the other cover types (13% increase) in the first period but lost around 586 ha (2% decrease) in the second. Grassland and degraded land decreased, accounting for 4.8% of the total area of the watershed in 1982 and 3.5% in 1998, as against 9.6% in 1957. Riverine trees suffered the greatest destruction, shrinking by 79% over the 4 decades; much of this decline was due to cultivation. Marshlands increased in the first period and decreased in the second. A new pond emerged amid the marshlands between 1982 and 1998. Population growth and the associated demand for land and trees was the major driving force behind the changes. This study shows that the deforestation trend was reduced and even partly reversed in the area because local people planted trees as a source of fuel and income. This trend ought to be encouraged through appropriate interventions—in particular by promoting planting of local species rather than eucalyptus—to increase not only economic but also ecological benefits. Indeed, the current state of land cover and its dynamics have environmental implications at the local scale and beyond. Hence, environmental management for sustainable development requires interregional and international cooperation.