In terms of land use and climate, the world is changing at an unprecedented rate and these changes have a significant influence on our water resources. This study was conducted to examine the individual and combined potential impacts of land use and climate change on the water balance of the Baro basin in Ethiopia for the baseline period (1985–2002) and near-future period (2023–2040) using the Soil and Water Assessment Tool (SWAT). The plausible land use scenarios considering current (CUR), business as usual (BAU), and further expansion of altitudinal forest and watershed management practices (CON), as well as climate change scenarios from regional climate model outputs (RCMs) under two representative concentration pathways (RCP4.5 and RCP8.5) for the 2023–2040 time frame, were used as inputs to the models. The monthly calibrated and validated SWAT model produced an acceptable result, which was then used for water balance simulations. Findings show that forest decreased from 54.5% to 48.9% and 41.2% while agricultural land increased from 21.8% to 29.7% and 39.8% under the CUR and BAU land use change scenarios, respectively. The results from the ensemble mean showed an increase in maximum and minimum temperatures and a decrease in rainfall under the RCP4.5 and RCP8.5 climate change scenarios, which in turn resulted in an increase in evapotranspiration (ET) and a decrease in water availability. Climate change outweighed the impact of land-use change, thus indicating an increase in annual ET by up to 12% and a decrease of 42% in surface runoff (SURQ) under the RCP8.5 scenario. The BAU land use scenario projection triggers a respective increase of 18% in annual SURQ and reduction of ET by 2%. However, under the CON land use scenario, SURQ decreased by 24%. The study concluded that future land use and climate change will further challenge the basin's water supply capacity to meet the increased water demand. Understanding the changes in the basin's water balance is critical for mitigation and adaptation options. As a result, this study proposes restoration efforts and climate-resilient water management strategies that can increase the resilience of the river basin.