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Understanding the complexity of land-use and land-cover (LULC) changes and their driving forces and impacts on human and environmental security is important for the planning of natural resource management and associated decision making. This study combines and compares participatory field point sampling (pfps) and remote sensing to explore local LULC dynamics. The study was conducted in two peasant associations located in the central Ethiopian Rift Valley, which is a dry-land mixed farming area exposed to rapid deforestation. From 1973–2006, the area of cropland doubled at the expense of woodland and wooded-grassland in both of the study sites. Major deforestation and forest degradation took place from 1973–1986; woodland cover declined from 40% to 9% in one of the study sites, while the other lost all of its original 54% woodland cover. Our study concludes that assessing LULC dynamics using a combination of remote sensing and pfps is a valuable approach. The two methods revealed similar LULC trends, while the pfps provided additional details on how farmers view the changes. This study documents dramatic trends in LULC over time, associated with rapid population growth, recurrent drought, rainfall variability and declining crop productivity. The alarming nature of these trends is reflected in a decrease in the livelihood security of local communities and in environmental degradation. Given these dry-land conditions, there are few opportunities to improve livelihoods and environmental security without external support. If negative changes are to be halted, action must be taken, including building asset bases, instituting family planning services, and creating opportunities outside these marginal environments.