The water resources in the Abay/Upper Blue Nile basin are the source of life for the several hundred million people living in the basin and further downstream. It provides more than 60% of the total Nile water. Intensive farming in unfavourable soils and slopes, overgrazing and soil erosion is among the major problems in the basin. Land degradation as a result of soil erosion decreases soil fertility in the upper catchments and simultaneously increases sedimentation in reservoirs and irrigation canals in downstream countries. Land degradation also affects basin hydrology and water resources availability. Therefore, sustainable water resources management in the basin is necessary that requires in-depth understanding of the basin hydrology. This could be achieved in one way through assessment of hydrological variability, investigating the two-way interactions between land use on the hydrologic responses, and detailed understanding of the rainfall runoff processes. Although detailed knowledge of the basin hydrology is important both from scientific and operational perspectives, it is hindered by the scarce hydro-meteorological data. Besides, the space-time variations of rainfall and other meteorological parameters as well as physiographic characteristics are large and, consequently, the hydrological processes are quite complex in the basin. Furthermore, these processes have been rarely investigated before. Therefore, analysing the hydrological processes at various spatio-temporal scales has the first priority to be able to predict the impact of changes in the basin and guide sustainable water resources management. This thesis aims at characterising and quantifying catchment processes and modelling in the basin through intensive field measurements and a set of different modelling approaches that complement each other in the range of space and time scales. Different methods including long-term trend analysis, field data collection and combined stable isotopes and process based rainfall-runoff modelling were carried out.