Preheat the oven to to 350 degrees F (175 degrees C). Grease bottoms of 2 8-inch round cake pans. Line bottoms of pans with parchment paper. Grease and flour pans.
Use the small hole side of a box grater to finely shred carrots. You should have about 1 1/3 cups finely shredded carrots.
Combine cake mix and carrots in a medium bowl. Add 1 cup water, eggs, and oil. Beat with a hand mixer on medium speed until smooth and well combined, about 2 minutes. Divide batter among prepared pans.
Bake until a wooden toothpick inserted in the center of the cakes comes out clean, 26 to 30 minutes.
Cool cakes in pans on a wire rack for 10 minutes. Loosen edges and turn out onto racks; remove parchment paper and cool completely, about 50 minutes.
Place one cake layer on a serving plate and spread 1/2 cup frosting evenly over top. Top with remaining layer and frost top and sides.
Garnish sides of cake with walnuts, if desired.
