Intensive grazing has been responsible for environmental degradation of moorland landscapes over the last 50 years. Anecdotal evidence on Dartmoor, UK, for example, has suggested that it is particularly associated with a greater frequency of large floods, lower baseflow and a greater occurrence of erosion. A study was therefore conducted at Holne Moor, a small catchment on east Dartmoor, to investigate the impacts of grazing animals on hillslope hydrology and stream discharge. The vegetation in the study area ranged from heather (Calluna vulgaris), in areas with low grazing intensity, to short grass with occasional erosion scars visible associated with larger sheep numbers. The physical characteristics of the topsoil beneath heather species were very different compared with short grass. This was not due so much to the direct physical impact of grazing animals, but indirectly to the chemical and biological differences brought about by changes in vegetation response and soil structure. The experiment at Holne Moor indicated that soil water content on the hillslope was linked directly to the stream's rainfall-runoff response via the soil water pathways. In relatively dry conditions, the soil water content is mainly determined by local factors such as vegetation. In wet periods, non-local influences such as slope and contributing area are more important. A soil water content threshold of around field capacity separated the two conditions. A comparison between soil physical properties and soil moisture under different vegetation types indicated that this ‘runoff’ threshold between dry and wet states is lower in heavily grazed areas. It is argued that more intense grazing causes conditions suited to the increased delivery of soil water to rapid flowpaths such as sheep tracks and other rapid routes which connect the source of this hillslope water to the contributing areas during large floods. Any alteration of vegetation and soil properties due to management causes a substantial increase in ‘active’ source areas and therefore discharge during large storm events even before any erosion occurs.