Settler and different organization in the city produce a large amount of refuses in several forms, frequently making our environments impure and unpleasant. The urban and Arsi University discarded solid and fluid waste disposal deteriorating water quality through decrease in quality indicators because of the undiscriminating dumping of different waste. Therefore, this study determine urban waste disposal effects on water quality at open waste dumping sites of Asella city, Arsi zone, southeast Ethiopia. To ratify the quality of water for public expenditure, recreation and irrigation purpose, the water quality index was performed in indicating the water quality in terms of index number. This water quality index was determined using the selected biological physical and chemical properties as pH, EC, BD, SMC, temperature, TDS, lead, chromium, cadmium, calcium, magnesium, potassium, sodium and total coliform. Composite water samples were collected from fluid waste disposal site and residue discarded from Arsi University to the watercourse along the watershed. Water sample was taken from Arsi university waste, Emipond and nursery site. A total of 9 samples were brought for laboratory analysis. Results of the mechanical analysis revealed that the problem of Arsi University discarded waste had significant effect on the water quality mainly at the nursery site which had been disturbing through toxification in excess presence than the critical value of pH at nursery site (8.53), Mg at Arsi university (36.01mg/l) and nursery site (30.78mg/l), K and Cr at nursery site (12.49mg/l and 0.053mg/l) respectively as well as total coli forming organism in Arsi University (161/100ml), Emipond (74/100ml) and nursery (108/100ml) site than the threshold value. Similarly, the mean value of Ec, Temp, TDS, Ca, Na , Cd and Pb are found less than the standard at all Arsi university, Emipond and nursery site whereas Mg at Emipond (23.09mg/l) and K at Arsi University (11.97mg/l) and Emipond (10.46mg/l) where found less than the standard. So, it was concluded that the average values of water from Ardu to Tulu dimtu watershed were found all biophysical-chemical indicators was contaminated at the nursery site according to World Health Organization standard for water quality. Therefore, management was required to undermine the cause of waste and treating the discarded material within the organization through recycling the use before release to the watershed community.