Knowledge of vegetation dynamics associated with human land-use change and environmental variables is crucial for sustainable watershed management. The objective of this study was to analyse woody plant diversity in response to the effects of anthropogenic disturbances, and topographic variables in different land-cover types. Woody plants ≥5 cm diameter at breast height (DBH) were recorded from 20-by-20 m plots, those <5 cm DBH were recorded from 10-by-10 m plots, and tree seedlings were recorded in 3-by-3 m plots. Nonmetric multidimensional scaling with Bray–Curtis distance was employed to analyse woody species composition. Woody species richness was analysed using generalised linear modelling. Tree diameter-class distributions were examined for population structure. The study identified 104 woody plants belonging to 52 families, where 74.5% were indigenous and 16.7% were endemic to Ethiopia. Asteraceae, Fabaceae and Rosaceae were the most species-rich families. There was evidence for the effect of anthropogenic disturbance and elevation on woody species composition. Wetlands contained the highest woody species richness, while woody species richness declined with increasing elevation and disturbance. Evidence of good regeneration was observed in wetlands. To sustain the ecological functions and services provided by the watershed, rehabilitation of the forest and shrub-cover should be a high priority for local management authorities.