The main concern that this study attempts to address is the reason that the local people sustainably conserve church forests while aggressively exploiting biodiversity in common forests, shrublands, and grasslands. The study assesses the local perspective on the links between flora biodiversity and ecosystem services across a range of management options in the typical watershed of the Northwest highlands of Ethiopia. A mixed study design that included questionnaires, remote sensing, and hermeneutics was used because of the multidisciplinary character of the research. There has been a perceptible decline in flora biodiversity in the open-access shrublands, forests, and grasslands as a result of increased settlement encroachment, unchecked and continuous overgrazing, excessive firewood collection, and the cutting of living and dead tree and shrub biomass. Because of this, it was noticed that the availability of wild edible plants, medicinal plants, trees to produce tools, habitat for wild animals, and lumber production is drastically reduced. Alternatively, the church forests were preserved with responsive caring, which enables the outstanding performance of the majority of ecosystem services (except for collecting firewood and fibers) for the local community with the principles of equality and inclusiveness. Therefore, to restore open-access communal grazing ecosystems and the synergy of many ecosystem services in a given watershed, an effective institutional structure must be developed at the local administration level. To offer a range of ecosystem services and socioeconomic benefits, reforestation and planting of both exotic and native plants with enclosure management established on the values of justice, equality, inclusivity, and well-managed local governance with strict laws, sanctions, and enforcement must be the cornerstones of the management plan.