Sediment yield estimation along with identification of soil erosion mechanisms is essential for developing sophisticated management approaches, assessing, and balancing different management scenarios and prioritizing better soil and water conservation planning and management. At the watershed scale, land management practices are commonly utilized to minimize sediment loads. The goal of this research was to estimate sediment yield and prioritize the spatial dispersion of sediment-producing hotspot areas in the Nashe catchment using the Soil and Water Assessment Tool (SWAT). Moreover, to reduce catchment sediment output, this study also aims to assess the effectiveness of certain management practices. For calibration and validation of the model, monthly stream flow and sediment data were utilized. The model performance indicators show good agreement between measured and simulated stream flow and sediment yields. The study examined four best management practice (BMP) scenarios for the catchment’s designated sub-watersheds: S0 (baseline scenario), S1 (filter strip), S2 (stone/soil bunds), S3 (contouring), and S4 (terracing). According to the SWAT model result, the watershed’s mean yearly sediment output was 25.96 t/ha. yr. under baseline circumstances. The model also revealed areas producing the maximum sediment quantities indicating the model’s effectiveness for implementing and evaluating the sensitivity of sediment yield to various management strategies. At the watershed scale, treating the watershed with various management scenarios S1, S2, S3, and S4 decreased average annual sediment yield by 34.88%, 57.98%, 39.55%, and 54.77%, respectively. The implementations of the soil/stone bund and terracing scenarios resulted in the maximum sediment yield reduction. The findings of this study will help policymakers to make better and well-informed decisions regarding suitable land use activities and best management strategies.