Rangelands in Ethiopian highlands are among the most threatened ecosystems as a result of unregulated expansion of crop cultivation and overgrazing. This study was conducted with the objective of assessing forage species diversity and determining their conservation status in the study area. Vegetation data was collected from a total of 60 sample plots of 400 m2 and 300 subplots of 1 m2 for herbaceous species. Sample plots were laid along six transect lines at a regular interval using systematic sampling techniques. To document indigenous knowledge, semi-structured questionnaire was used and 60 farmers were interviewed. Descriptive statistics was used for data analysis. A total of 58 species belonging to 53 genera and 22 families were collected and identified. Poaceae and Asteraceae were the most important families having diverse genera and species. Higher species diversity was documented in privately owned rangeland than in the communal rangeland indicating the negative impacts of overgrazing and unregulated expansion of crop farmland into rangelands. Farmers identified human population growth and cropland expansion into rangelands as major factors for rangeland degradation and loss of forage species. Sustainable management of rangeland resources using area enclosure as one management tool for ecosystem restoration and biodiversity conservation was recommended.