This chapter examines the details of land-use impacts on the hydrology of tropical montane forest at the watershed scale, with particular reference to the Tambito area in south-western Colombia. In a series of model experiments a watershed-scale, GIS-based, dynamic hydrological model was used to simulate the hydrological impacts of progressive deforestation as a result of expansion of the agricultural frontier. The simulations were driven by 52 separate iterations of a cellular automaton-based land-use change model. Model results were analyzed to understand the changing sensitivity of total runoff and erosion to forest loss as deforestation occurred in different parts of the watershed. Sensitivity was calculated for each output variable as the change in the value of the output variable between two successive model iterations divided by the area of land deforested in those iterations. The results indicated an exponential increase in the sensitivity of these processes to deforestation beyond a threshold of 60% forest loss in the watershed. The patterns of sensitivity at a particular iteration of the cellular automaton tended to reflect: (i) the landscape properties of the area remaining under forest, (ii) the soil properties of both forested and deforested areas, and (iii) the location of the deforestation front relative to high-order streams and important lateral hydrological links within the watershed.