Gilgel Gibe III hydropower project is one of the large-scale projects presently under construction in Ethiopia. The project has been surrounded by controversies and strong oppositions. This study sought to examine these controversial issues, the causes and consequences of these challenges. It also highlights the impact of the project on livelihoods in local communities and on the environment along the 150 km long stretch of the river which will be inundated as a result of the dam. Local people‟s perceptions within the project area were also explored. The study focused on Addisu Bodere Peasant Association (PA) which is one of the PAs located in the immediate vicinity of the dam site. The study employs interviews, focus group discussion, and informal conversations, as well as secondary data sources.hand, the general perception of the local communities on the new project was generally positive expecting that this development will supply them electric light, facilitate school and health services, and establish parallel and radial road networks on both sides of the river and have fair market prices to farm products. Strengthening these positive perceptions and expectations depends on the development plan and transparency of decision makers involving a greater participation of local communities and pertinent development partners.