Soil erosion is a common phenomenon and major threat in many parts of Ethiopian highlands and it remains difficult to quantify and measure the amount of soil erosion. Geographic Information System (GIS) provides spatial information to identify erosion potential areas and useful tools to estimate the annual soil loss based on Revised Universal Soil Loss Equation (RUSLE). This research was conducted in Central Highlands of Ethiopia, Muziye watershed which is 112 Km far from Addis Ababa north direction and covers 475 ha area. The aim of this research was to estimate the annual soil loss from the watershed and to map the topographic and anthropogenic factors for planning and implementation of sustainable soil conservation and management system in the watershed. A Revised Universal Soil Loss Equation (RUSLE) preferred for Ethiopian conditions and GIS was used to estimate soil losses and identify potential effect of erosion factors. We employed IDW- interpolation map for rainfall erosivity (R) factor, soil map soil erodibility (k) factor, a 30m×30m Digital Elevation Model (DEM) for topography (LS) factor, satellite image for vegetation cover (C) factor, land use and slope class map for management (P) factor. The mean annual soil loss estimated in watershed was 44.67 tons ha-1yr-1 from 569.35 ha. The results revealed that about 23.44 % of the watershed area undergoes moderate (5-10 tones ha-1 yr-1) to very slight (>2 tones ha-1 yr-1) erosion classes, 22.54 % high (10-50 tones ha-1 yr-1) erosion class, 38.8 % from severe (50-100 tones ha-1 yr-1) to very severe (100-500 tones ha-1 yr-1) erosion classes, and 15.23 % catastrophic (>500 tones ha-1 yr-1) erosion class. Based on our findings we recommended that, high to catastrophic erosion risk area of the watershed requires various soil and water conservation activities that intercept runoff by decreasing the transport capacity of flow and improving soil infiltration in the steep slope using terracing, contouring, and strip cropping, reducing the intensity of tillage and growing cover crops and rehabilitating hillside slope areas with different indigenous and exotic tree species should be embarked upon by participating farmers in conservation strategies from plan preparation to implementation. Soil erosion hot spot areas that were identified in the soil erosion map should be given a serious attention and priorities for implementing soil conservation activities before the areas reached to irreversible soil degradations.