The impact of climate change (CC) and land-use/land-cover (LULC) change on water resources poses a major threat globally. This study investigates the separate and combined responses of CC and LULC change on water balance in Gidabo watershed, Ethiopia, using Soil and Water Assessment Tool (SWAT), Cellular Automata-Markov Chain, and regional climate models. CC projection under RCP 4.5 and hydrological modeling show a significant decline in mean annual surface runoff (Q), baseflow (BF), water yield (WY), percolation (PC), and evapotranspiration (ET) during mid-century (2027–2056) as well as late-century (2061–2090) compared to the baseline period (1988–2018) data, largely due to decline in rainfall. Likewise, under RCP 8.5 scenario, the modeling results show a decrease in Q, BF, WY, PC, and ET during these periods. The LULC change (often associated with an expansion in cultivated and urban areas and a reduction in evergreen forest and grassland) alone leads to a positive synergy with an increase in mean annual Q and WY and a negative synergy with a decrease in BF, PC and ET during the period 2018 to 2075. The combined effects of climate and LULC changes have also shown a decline in Q, BF, WY, PC and ET. Overall, the climate change impacts significantly the future Q and WY. However, the combined effect of climate and LULC changes on BF, PC, and ET is more prominent than their separate impacts and it underlines the significance of this study.