The overall objective of this study is to explorethe practice and challenges of villagization; in the selected woredas of the Assosa zone  BeninshangulGumuzregional state. To achieve goals of the survey study mixed research method was employed.Generally.the Sample size of 168 sample households were determined by using S = X²NP(1-P) ÷ d² (N-1) + X²P (1-P), The research employed exploratory research design on the challenges and implementation of the program, and it applied mainly qualitative methods. On the basis and types of data gathered and the instrument used, both quantitative and qualitative techniques of data analysis or binary logistic regression supported by SPSS was employed.To calculate economic welfare lossI, used the change in price and the change in quantity demanded of goods and services. Welfare Loss = 0. 5 * (P2 - P1) * (Q1 - Q2).The only good thing about this life was farming since people had fertile lands. But, when villagization was implemented the lives of the villagers improved because they started to have better access to social services. The study showed that villagization was implemented voluntarily and based on the consent of the local people. However, it is possible to conclude that villagization has significantly improved the lives of the villagers by bringing positive changes that did not exist before. people.