This study quantifies the costs of erosion in a watershed of the Ethiopian highlands over a two-year period, accounting for topsoil nutrient losses, time costs due to disrupted travel networks, and the value of lost animals and trees. We use a nutrient replacement cost to value topsoil nutrient depletion, daily wage rate to monetise the opportunity cost of labour due to gully erosion, and local market prices to quantify the lost animals and cash crop trees. The total cost of soil erosion in the watershed during the two years was over $18 000, a cost of $22 per ha per year, $17 per person per year or about 19% of per capita income. The nutrient depletion from topsoil comprised only 42% of total costs. Given these large costs, remediation measures focused on participatory community-based efforts should be evaluated to reduce the severity of soil erosion and its associated effects.