This study investigates the perceptions of rural households in Aleta-Wondo District, Ethiopia, regarding domestic biogas technology and its potential to reduce deforestation and dependence on biomass for energy. Domestic biogas is a renewable energy solution that can decrease reliance on traditional fuels like firewood, charcoal, and kerosene, which contribute to deforestation and environmental degradation. However, biogas adoption remains limited in the region. A survey of 191 households (90 adopters and 101 non-adopters) was conducted using multistage sampling, with data analyzed through descriptive statistics and regression models to determine adoption patterns. Biogas adoption significantly reduced traditional fuel use: firewood consumption decreased by 83.33%, charcoal by 66.67%, and kerosene costs for cooking were eliminated. This shift reduced deforestation and promoted forest regeneration. Adopters also experienced notable time and financial savings, including an 81.82% reduction in monthly firewood use, an 80% decrease in firewood collection trips, and a weekly time savings of 8 hours (72.7%). Key factors influencing adoption, identified through binary logistic regression (p < 0.01; pseudo R2 = 49%), included household head's sex and education, income, water access, livestock ownership, and credit availability. The study highlights biogas as a sustainable, cost-effective solution to reduce energy problem, conserve forests, and improve rural livelihoods. However, adoption barriers such as financial constraints, technical expertise gaps, and limited credit access must be addressed. Targeted government support, including financial incentives, technical assistance, and capacity-building, is essential to scale up adoption and maximize its benefits.