Abstract: In Ethiopia, the state owns all lands within the territory of the country. Cities are incorporating large parcels of land from their surrounding rural agricultural areas through land expropriation. However, these land developments do not consider the nonmarket value of ecosystem services (ES), which is causing a deterioration of the existing ES and reduction on the potential supply of ES from agricultural land. The aim of this study was to estimate the monetary value of nonmarketable ES from the agricultural land using a double-bounded dichotomous choice contingent valuation method. A survey of 524 smallholder farmers was conducted. In the survey, respondents were asked to state their willingness to pay for the improvement of some of the nonmarketable ES: erosion control, air and climate regulation, water regulation, and soil fertility. The estimation was carried out using a bivariate probit model. The results revealed that farmers are willing to pay on average 276 ETB (7.9 USD) per hectare per year for a period of 10 years. We found that individual characteristics such as age, family size, and a recent land expropriation experience adversely affect the willingness to pay by the farmers. On the other hand, individuals with higher income and larger land size are willing to pay more. In general, the study indicated that the nonmarket ES, which are affected by the land expropriation for urban expansion, are valuable for the farmers. Therefore, we recommend that the government consider the value of nonmarketable ES in its land use decisions and hence achieve sustainable land development.