Wetlands in Tanzania are among the world’s most biologically productive ecosystems and are rich in species diversity. Wetlands support family livelihoods through crop production, grazing pastures and direct resource extractions. Ecologically, wetlands are instrumental in water storage, filtration, flood control and toxic retention and are also important habitat for biodiversity both flora and fauna. The last 30 years have witnessed rapid degradation of wetlands which threatens livelihoods; disturbs ecological settings and leads into unsustainable development. In this study, an attempt has been made to describe the livelihoods and sustainability issues of the Bahi Wetlands in Central Tanzania. This is a semi-arid area and therefore the wetland plays a key role socio-economically and environmentally. Data were collected from 200 households in Ngaiti and Kitalalo villages using structured and semi-structured questionnaires. There were also focused groups interviews, key informants and Participatory Rural Appraisal methods. Findings show Bahi Wetlands to play a significant role in livelihoods, cultural and ecological functions. However, the sustainability of the wetlands is threatened by over-cultivation, overgrazing and over-extraction of natural resources directly. Livelihood diversifications through credit provision, improved extension services and strengthened local institutions, are recommended. Wetlands policy and laws should be developed and enforced.