Understanding the spatio-temporal dynamics of land use and land cover (LULC) and their drivers is instrumental in synthesizing knowledge for informed natural resource management, planning, and associated decisions. The objective of this study was to analyze LULC dynamics and their drivers in the Nyangatom district of southwest Ethiopia. This study adopted a mixed-method approach, comprising remote sensing and geographic information system-based analysis, focus-group discussions, key informant interviews, and structured interviews covering 384 agro-pastoral households. Land use and land cover maps were compiled with Landsat image data from 1992, 1999, 2010, and 2020 using supervised pixel-based classification with a maximum likelihood algorithm. The study revealed that grassland (33%) and shrub land (27%) are the dominant LULC classes in the study periods. The results show a significant increase in settlement, cropland, and bare land, between 1992 and 2020 following demand for fertile lands, overgrazing, and climate changes. Reductions in the water body, open woodland, riverine forest, and dense woodland of − 23%, − 18%, − 18%, and − 7%, respectively, were observed for the same period with an overall accuracy of 80%. Agro-pastoralists identified agricultural expansion, overgrazing, and drought as the main drivers of LULC changes, followed by conflicts, invasion of alien plant species, and change in policy institutions. The impacts of unplanned LULC change can be reduced through appropriate land-use planning with genuine stakeholder engagement. Updated information on present and future LULC dynamics can support these social dynamics and align a shared understanding among stakeholders that replaces polarization and erosion of mutual trust.