The available water volume of Lake Ziway in Ethiopia is declining at an alarming rate which hinders the lake services for a wide variety of sectors. However, there is a lack of systematic study to evaluate the contribution of water withdrawal by various sectors to the decline in the lake actual storage. In the present study, we conducted a Water Abstraction Survey (WAS) to estimate actual water withdrawal from the lake and a water balance model to evaluate the isolated impact of water withdrawal on the lake water volume and level. The likely impact of three development pathways on the lake storage and water level was assessed. Results indicate that the existing water withdrawal for irrigation has significantly contributed to the change in the actual storage of Lake Ziway. When the future development plans are fully implemented, the annual amount of irrigation water withdrawal from the lake will be 94 Mm3. This will cause the lake water level to drop by 0.94 m, which translates to 38 km2 reduction in the lake surface area. Consequently, the lake will lose 26% of its actual storage volume. Hence, the current impact of water resources development around the lake is substantially large and will exacerbate in the future. This calls serious action on the management of water abstraction from the lake.