<p>Industrial discharges increasingly threaten the water quality of the Wabe River in southern Ethiopia. This study assesses the impact of local industry effluent on river water quality and evaluates the river’s natural pollutant removal capacity using the QUAL2Kw simulation model. Grab samples were collected during the dry season from six river sites and one industrial outfall monthly for three consecutive months and analyzed for physicochemical parameters. River geometry was extracted using Google Earth and processed in HEC-RAS. The model was calibrated and validated using root mean square percentage error (RMSPE). Results revealed high concentrations of BOD₅, TSS, TP, and COD in the industrial effluent, with some parameters exceeding Ethiopian discharge standards. While the river generally exhibited good overall water quality, significant spatial variations (<i>p</i> &lt; 0.05) were observed for EC, pH, temperature, BOD₅, TN, alkalinity, TSS, NH₃-N, and NO₃-N, particularly near the effluent mixing point. QUAL2Kw well simulated spatial variations for most parameters (RMSPE &lt; 20%), though COD, NH₃-N, and TSS showed higher deviations due to complex site-specific processes and limited dry-season data. Pollutant removal analysis revealed substantial increases in BOD₅, COD, ammonium, and nitrate immediately downstream of the discharge, with limited natural attenuation capacity downstream. These trends demonstrate the river’s constrained self-purification effectiveness under current pollution loads. The study highlights the urgent need for stricter regulation of industrial discharges, routine water quality monitoring, and implementation of nature-based treatment solutions to restore and protect the ecological health of the Wabe River.</p>