Tropical forest ecosystems generate multiple benefits to society, among which are goods such as fuelwood, fodder, timber, leaf manure, food and medicines, and services such as carbon sequestration, habitat for wildlife, and biodiversity. One important set of benefits from forest ecosystems is watershed services, which include hydrological regulation (groundwater recharge, low–flow augmentation, and flood control) and soil conservation. Thus, changes in forest conditions are likely to have profound implications for society. This is particularly true in the case of river basins in South Asia, where forests as well as water resources are being used intensively by a large population, often under a highly seasonal rainfall regime.In spite of their importance, the watershed service benefits of tropical forests and associated ecosystems are perhaps the least well understood and the most contentious of all forest–related benefits. Neither are the physical relationships between forest cover and watershed services adequately understood, nor (partly as a consequence) are their socio–economic impacts accurately assessed. As a result, when it comes to the management of forested watersheds, policy making is dominated by conventional wisdom that assumes that ‘more forest’ of any kind at any location and in place of anything else is ‘better’ for all watershed services for all communities downstream. Such oversimplifications are no longer scientifically tenable.