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Khat is a one to twenty-five meters tall evergreen tree, bush or shrub. People in many countries, including Ethiopia, consume the fresh green leaves of khat. Studies in khat consumption related to its economic and social effects are few in Ethiopia. This paper presents the results of a study on perception, attitudes and effects of khat consumption in Assanodugderera at Silti district of southwestern Ethiopia. A survey of one hundred and thirteen family heads was conducted in Assanodugderera to understand the extent of khat consumption and its effects on the family income. In-depth interviews were made to four key informants. Observations were also made in public gatherings and festivals. The study results show that over 95% of respondents in Assanodugderera were found to be khat consumers, whereas the other 5% had either stopped or never consumed khat in their lifetime. Respondents gained about 756 Ethiopian. Birr (100 US Dollars) on average per annum from khat cultivation, which is 38% of their total annual average income. On the other hand, respondents spent about 392 Eth.Birr (51 US Dollars) on average per annum, or about 23% of their total average expenditure per year on khat consumption. With regard to perceptions, people in Assanodugderera assumed that khat was not originally consumed by common people, but was used long ago by a very few cultural and religious leaders. Khat cultivation and consumption was gradually transferred to this time, in which now almost every person in the community consumes khat for different purposes.