Groundwater resource potential is the nation’s primary freshwater reserve and accounts for a large portion of potential future water supply. This study focused on quantifying the groundwater resource potential of the Upper Gilgel Gibe watershed using the water balance method. This study began by defining the project area’s boundary, reviewing previous works, and collecting valuable primary and secondary data. The analysis and interpretation of data were supported by the application of different software like ArcGIS 10.4.1. Soil water characteristics of SPAW (Soil-plant-air-water) computer model, base flow index (BFI+3.0), and the water balance model. Estimation of the areal depth of precipitation and actual evapotranspiration was carried out through the use of the isohyetal method and the water balance model and found to be 1 664.5 mm/a and 911.6 mm/a, respectively. A total water volume of 875 829 800 m³/a is estimated to recharge the aquifer system. The present annual groundwater abstraction is estimated as 10 150 000 m³/a. The estimated specific yield, exploitable groundwater reserve, and safe yield of the catchment are 5.9%, 520 557 000 m³/a, and 522 768 349 m³/a respectively. The total groundwater abstraction is much less than the recharge and the safe yield of the aquifer. The results show that there is a sufficient amount of groundwater in the study area, and the groundwater resources of the area are considered underdeveloped.