This study analyses the relation of forest cover and stream flow on the 266 km2 Koga watershed in a headwater of Blue Nile Basin using both observed hydrological data and community perception. The watershed declined from 16% forest cover in 1957 to 1% by 1986. The hydrological record did not reveal changes in the flow regime between 1960 and 2002 despite the reduction in forest area. This agrees with the perception of the downstream community living near the gauging station. The upstream community, however, reported both decreases in low flows and increases in high flows shortly after the forest cover was reduced. The upstream deforestation effect appeared to have been buffered by a wetland lower in the watershed. This study concludes that community perception can be a complement to observational data for better understanding how forest cover influences the flow regime.