Understanding the magnitude and drivers of land cover change is key to designing effective natural resource management interventions and restoring degraded landscapes. We analyzed land cover change from 1995 to 2015 in Fagita Lekoma District in northwestern Ethiopia using Landsat images and found that forest cover increased by 1.2% per year, while areas covered by cropland decreased by 1% per year. The increase in forest cover is mainly attributable to increased planting of Acacia decurrens. The expansion of A. decurrens plantations could be attributed to its potential to provide short-term economic benefits. This indicates that economic activities that generate short-term benefits may strongly influence the selection of land uses in the study area. Planting of A. decurrens generates job opportunities for the landless and enables farmers to diversify their livelihoods. It rarely restricts other agricultural practices, as farmers are able to grow cereals between the trees in the first 2 years following the establishment of an A. decurrens plantation. This enhances the efficient utilization of farmlands and diversifies agricultural products. Providing training to farmers on silvicultural practices and presenting alternative tree species are crucial to enhance their benefits and sustain charcoal production in such mountainous regions. Studies are required to understand how the observed land cover change affects land productivity, landscape, and biodiversity.