Large quantities of sediments leave the Himalaya through its rivers. These rivers are charged with sediments depending on the types of land use in the watersheds. Land use/cover change and hydrology was studied in a watershed in the Sikkim Himalaya. The land use change from forest and agroforestry to open agriculture has increased by 11% from 1988 to 1992. During the same period substantial areas of dense mixed forests have been converted to open mixed and degraded forests as a result of high pressure on natural resources. Stream flow was highest in the rainy season and lowest in summer season in all the streams and all the three years (1994–1997) of the study. The water quality of streams from different microwatersheds varied significantly between seasons and streams. Sediment and nutrient loss was estimated in microwatersheds and soil loss from the total watershed ranged from 4·18 to 8·82 t ha−1 yr−1 during the three-year period of study. The annual total nitrogen loss estimated at the watershed outlet was at a rate of 33 kg ha−1, organic carbon 267 kg ha−1 and total phosphorus 5 kg ha−1. This study suggests that the upland microwatersheds can be hydroecologically sustainable only if good forest cover and dense forests with large cardamom-based agroforestry are maintained. Copyright © 1998 John Wiley & Sons, Ltd.