Gurage Zone is one of the areas of Ethiopia experiencing rapid land use and land cover (LULC) changes over the past few decades. This study assessed the contribution of eucalyptus expansion to LULC changes based on a detailed household level survey, key informant interviews, focus group discussions and a set of Landsat imageries. Both descriptive statistics and econometric model were employed for the analysis of drivers of eucalyptus plantation. LULC change detection technique was used to examine the changes in LULC over time. This study achieved a mean classification accuracy of 89.17% and 0.83 overall Kappa statistics for the tree LULC maps. The result of descriptive analysis revealed that more than 42% of the sampled households have planted eucalyptus trees on crop land. The study indicated that eucalyptus plantation which was fourth in LULC ranking in 2000 has increased by 68.3% in 2021 to become the second largest land cover next to crop land. On the other hand, from 2010 to 2021, the area covered by crops showed a decline. This indicates eucalyptus tree to be the major cause of LULC change in the study area. The econometric estimation identified the micro-level drivers such as land size and access to market to be important factors influencing eucalyptus plantation. This study suggests that the rapid expansion of eucalyptus plantation on fertile soil requires an immediate policy response in order to balance food crop production and eucalyptus plantation in Gurage Zone.