Beaver dams are generally only constructed when the water course is too shallow to afford suitable living habitat. In areas of high quality habitat on wide rivers or lakes beavers do not construct dams.  In the upper reaches of wooded river systems series of beaver dams are significant hydrological features which can modify the water table on both a local and catchments level.

In the upper reaches of river catchments beaver dams have a significant effect in slowing water run-off during periods of flooding and low water. Dams increase water retention times thus reducing peaks and troughs in water flow downstream and can dramatically reduce incidents of flooding downstream. The amount of water held above a dam will vary according to local conditions. Studies in Brittany show that on low gradient streams this can be up to 6 times the volume compared to an un-dammed stream while on steeper gradients it can be up to 35 times the volume.

Beaver dams act as highly effective silt traps which decrease down-stream sediment loads.

A series of three dams on the Sumka River in Russia trapped 4250 tons of sediment - mainly from agricultural erosion - in one year, reducing the sediment load by 53% and downstream lake siltation significantly. In Brittany a channel capacity to purify/detoxify agricultural discharge has been calculated as being increased by up to 10 times on beaver dammed streams. 

These cumulative impacts in the upper catchments of major river system have a significant positive impact on water quality down stream.