Policy failure in controlling horizontal urban expansion coupled with agricultural/cultivated land expansion typically leads to forest degradation mostly in developing countries. Peri-urban areas are havens and vulnerable and dispute areas of uncontrolled urban expansion and forest degradation. This study was aimed to assess the effect of cultivated land and urban expansion land use/land cover change (LULCC) dynamics rate on peri-urban forest degradation and implications on sustainable environment management there by identifying the derivers of LULCC. The study used Landsat images of 2002, 2010 and 2018 and examines the underlying factors. The results revealed significant conversion from forest and grass land to built-up and cultivated land. The proportion of built-up area and cultivated land increased to 75 ha yr−1 and 85 ha yr−1 of the study area from 2002 to 2018, respectively. The identified drivers were generally grouped as proximate and underlying drivers. The effect of driving factors in shaping LULCC tends to remain stable over time, and the gradual enforcement of spatial planning policies appears to be important factors in dynamics of LULCC. Hence, it was suggested that integrated land-use planning and management has a paramount importance of reducing peri-urban forest degradation and maintaining sustainable environmental management.