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Declining natural forests and growing demands for wood products are encouraging the rapid expansion of eucalypt farm forestry in Ethiopia, and Arsi Negelle district represents areas with recent plantation expansion in the Rift Valley area of Ethiopia. This study assessed trends in eucalypt planting over the last five decades, identified the determinants, and examined perceptions of local stakeholders towards this expansion in the district. Quantitative data were gathered through a household survey and farm level inventory. About 90% of the respondents had planted eucalypts, and 52% of them were engaged in planting since the late 1990s. About 11% converted cropland to eucalypt woodlots, which is also a growing trend in the area. Proximity to Arsi-Forest Enterprise (P<0.01) and area of land holding (P<0.01) positively and significantly affected both decision to plant and land area allocated to eucalypts plantings. Active labour in the family negatively and significantly (P<0.05) affected planting decisions, while education level of the household head positively and significantly (P<0.05) affected land area allocated to eucalypts plantings. Despite strong policy discouragement and perceived adverse ecological effects by the farmers themselves, 96% of them and 90% of the district experts support the expansion. Eucalyptus has become the most desired and planted tree genus, and economics not ecology appears to drive its expansion. Unless better alternative sources of cash income and substitutes for energy and construction materials are found, its expansion is likely to continue even at the expense of cropland. It is concluded that research is needed to fine-tune current eucalypt farm forestry practices to reduce the associated ecological externalities, rather than grossly banning eucalypt planting by smallholders.