In order to investigate the effect of land use and land cover changes on hydrological process in northern parts of China, a distributed hydrological model was developed and applied in the Laohahe catchment. The direct evaporation from the intercepted water, potential canopy transpiration and potential soil evaporation were computed using a physically-based two-source potential evapotranspiration model, which would be regarded as input to the distributed hydrological model for the computation of actual evaportranspiration. Runoff generation was based on mixed runoff mechanisms of infiltration excess runoff and saturation excess runoff and the Muskingum-Cunge method was adopted for flow routing. The land cover data were available for 1980, 1989, 1996 and 1999. Daily streamflow measurements were available from 1964 to 2005 and were divided into 4 periods: 1964–1979, 1980–1989, 1990–1999 and 2000–2005, based on the land cover scenarios. The distributed hydrological model was coupled with a two-source potential evaportranspiration model for simulating daily runoff. The result of runoff simulation showed that the saturation excess runoff generation was dominant in the catchment. Model parameters were calibrated using hydrometeorological and land cover data corresponding to the same period. Streamflow simulation was conducted for each period under these four land cover scenarios. The results showed that the change of land use and land cover had a significant influence on evapotranspiration and runoff. The land cover data showed that forest land and water body had decreased from 1980 through 1999 and farm land and grass land had increased. This change caused the vegetation interception evaporation and vegetation transpiration to decrease, whereas the soil evaporation tended to increase. Thus the green water decreased but the blue water increased over the Laohahe catchment. This result was inconsistent with the fact that runoff ratio had a tendency of decrease in the catchment in 2000. It is this reason that water use out of stream channel has been increasing in recent years.