Hydropower is an important energy source in Malawi because it provides almost all of the country’s electricity generation capacity. This paper has reviewed the impacts of environmental degradation and climate change on hydropower generation in Malawi. Energy scenario and other issues that contribute towards the current state of environment have been discussed. All of Malawi’s hydropower stations are run-of-river schemes cascaded along the Shire River with an installed capacity of nearly 280 MW. The generation is impacted negatively by floods, siltation, droughts and aquatic weeds infestation. The way how these challenges are being exacerbated by the poor state of the environment, especially within the Shire River basin in particular is also discussed in the paper. Measures taken by the national electricity utility company on how to manage the impacts are discussed as well. The paper concludes that hydropower generation system in a highly environmental degraded area is difficult to manage both technically and economically. In the case of Malawi, diversifying to other energy sources of generating electricity is considered to be a viable option. Some mitigation measures concerning environment degradation and climate change challenges have been suggested in the paper.