Natural resource management (NRM) in Ethiopia has shown notable progress over time. However, the marginalization of indigenous knowledge within formal governance frameworks poses serious risks to biodiversity, climate resilience, and sustainable livelihoods. This study explores the pivotal role of informal institutions, specifically the Oromo Gada System, in promoting effective NRM. Drawing on institutional theory, the paper employs a qualitative literature review to synthesise evidence on how the centuries-old Gada system serves as a resilient governance framework for managing common-pool resources (CPRs) such as forests, water, and rangelands. The analysis situates the Gada system within established self-governance principles, underscoring its culturally embedded ecological ethics and effective, community-based enforcement mechanisms. The findings reveal that the Gada system represents a viable and sustainable alternative to culturally-centred NRM approaches. Nonetheless, its potential is constrained by institutional overlaps and limited collaboration from formal state structures. The study concludes by supporting an integrated governance model that harmonises formal and indigenous institutions, capitalising on the Gada system’s legitimacy and traditional ecological knowledge to foster long-term environmental sustainability in Ethiopia.