The upstream watershed area is a very vital area because of its protective function for the entire watershed. One of the activities that develop quite rapidly in various upstream watersheds in Indonesia is a settlement. The rapid development of settlement activity has been frequently blamed for the decline in the hydrological function of watershed areas. In order to achieve sustainable development in the upper part of the watershed, it is necessary to develop settlements - which are often already grown - and manage the natural resources sustainably. Kampung Cikapundung, Suntenjaya Village, Lembang District, West Bandung Regency is one of the most rapidly increasing settlement area in the upstream part of Cikapundung River. In addition to its rapid development of the built environment, the activity of dairy farms in this village causes considerable negative impacts to Cikapundung River watershed downstream areas, especially through organic waste as the dairy farms waste product that floats on the body of Cikapundung River. The purpose of this paper is to assess the sustainability level of settlements in Kampung Cikapundung and formulate the direction of development. Eco Degree (E) rating model is used to assess the sustainability of settlement areas in Kampung Cikapundung. The results of the analysis show that the settlement areas are categorized as Semi Eco Settlements. Several suggestions are given as some efforts to create more sustainable settlements.