Ecotourism in Wanchi-Dandi, Ethiopia, holds significant potential for advancing environmental conservation, socio-economic development, and climate adaptation, yet it grapples with challenges such as inadequate waste management and inequitable revenue distribution. This mixed-methods study, conducted from January to July 2025, assesses these impacts through surveys (n = 333), focus group discussions (FGDs), key informant interviews, and field observations. Results reveal that 58% of respondents perceived positive conservation outcomes, including 2,000 trees planted and a 5% increase in bird populations. Additionally, 53% acknowledged socio-economic benefits, such as 65 jobs created by 2025, while 48% recognized climate adaptation contributions, notably a 10-ton annual emission reduction. However, 18% highlighted inequities, with 40% of revenue ($20,000) captured by external operators. Logistic regression identified education (OR  =  1.25, p = 0.012), attitude (OR = 1.789, p = 0.003), income (OR = 1.455, p = 0.020), community engagement (OR = 1.50, p = 0.015), gender (OR = 1.329, p = 0.048), and age (OR = 1.20, p = 0.030) as predictors of positive perceptions. Recommendations include community-led waste management systems, transparent revenue-sharing mechanisms, infrastructure investments, expanded training programs, and a 2026 local ecotourism policy. This study enriches community-based ecotourism (CBET) literature by providing localized insights, extending Stakeholder and Social Exchange Theories, and addressing gaps in Ethiopia’s sustainable tourism framework. Limitations include potential sampling bias due to underrepresentation of short-term visitors. Future research should explore longitudinal impacts and regional comparisons.