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Lake Tana watershed is one of the growth corridors of the country identified by the government of Ethiopia. The competition for land among the different alternative land uses is intense. One of these is eucalyptus plantation not only on marginal lands but also on fertile plots used for producing annual crops. The trends and driving forces of eucalyptus plantation in the Lake Tana watershed and in Amhara region of Ethiopia in general are not well documented. This chapter reports on findings of a study on the trends and driving forces of eucalyptus plantation in Lake Tana sub basin based on preliminary assessment of major eucalyptus production areas of Amhara region and a case study from Mecha district of West Gojjam, Amhara Regional State. The district represents the major eucalyptus plantation area of the watershed. The study was conducted in 2011 and 2012. In addition to the visit of the major eucalyptus production and marketing sites and key informants interview in Amhara region, formal survey was administered to 400 sample households randomly and proportionately selected from high, medium and low level eucalyptus planting kebeles of Mecha district. Results show that close to 77% of the sample households had planted eucalyptus. The trend of eucalyptus plantation is increasing and has been particularly high since 2002. Wald test has been used to check the presence of the structural break of trend in the year in the yearly cumulated number of farming households who started eucalyptus plantation. The result confirms the presence of significant structural break in trend for the year (p < 0.01). More than 60% of the eucalyptus growers plant eucalyptus in woodlots on plots with plain topography and with medium to high levels of soil fertility . This indicates that eucalyptus plantation is expanding at the expense of crop production. The major drivers for the expansion raised by key informants are the increasing price of farm inputs (mainly fertilizer) for crop production, the Ethio-Sudan cross-border trade, the rising demand of wood for construction, industries and woodwork shops, and inadequacy of wood from natural forests due to deforestation. Besides these socioeconomic drivers, certain biological properties of eucalyptus make it especially appealing. Adaptability to wider agro ecological zones, coppicing ability, fast growth rate, straight poles, low labor demand, and resistance to diseases and pests are its commonly cited qualities. Given the growing demand for wood in the domestic and international market, and the expressed intention of most rural households to plant eucalyptus, eucalyptus plantation is likely to expand even more in the Lake Tana watershed. Therefore, proper land use development and organization of appropriate institutes for optimum level of eucalyptus plantation and balanced enterprise choice for the rural households and overall development of Lake Tana watershed and the region are suggested.