Currently, soil erosion is the major environmental problem in the Blue Nile, Hangar watershed in particular. This study aimed to estimate the spatially distributed mean annual soil erosion and map the most vulnerable areas in Hangar watershed using the revised universal soil loss equation. In this model, rainfall erosivity (R-factor), soil erodibility (K-factor), slope steepness and slope length (LS-factor), vegetative cover (C-factor), and conservation practice (P-factor) were considered as the influencing factors. Maps of these factors were generated and integrated in ArcGIS and then, the annual average soil erosion rate was determined. The result of the analysis showed that the amount of soil loss from the study area ranges from 1 to 500 tha−1 yr−1 with an average annual soil loss rate of 32 tha−1 yr−1. Considering contour ploughing with terracing as a fully developed watershed management, the resulting soil loss rate was reduced from 32 to 19.2 tha−1 yr−1. Hence, applying contour ploughing with terracing effectively reduces the vulnerability of the watershed by 40%. Based on the spatial vulnerability of the watershed, most critical soil erosion areas were situated in the steepest part of the watershed. The result of the study finding is helpful for stake holders to take appropriate mitigation measures.