Sarawak is a state in Malaysia that has many potential sites for hydropower dams as Sarawak houses many hilly areas which are yet to be developed. As a result, many hydropower dams were proposed in Sarawak. This paper reviews the environmental and social impacts of hydropower projects in Sarawak. The murky river waters of Sarawak contributed to a high level of sedimentation in the hydroelectric plant reservoirs which increases the emission of greenhouse gases through mineralization and indirectly affects the lifespan of a hydroelectric plant. The ecosystem is adversely affected by the loss of trees, destruction of habitat for flora and fauna, and the narrowing of rivers due to sedimentation. The construction of hydropower plants forces nearby indigenous communities to relocate, which are given compensation by the Sarawak government. The issues behind the relocation process are explored in this paper with further details. The communities that are affected by the construction of the hydropower dams will have to be displaced from their original lands; thus, the approach by the government to compensate the affected locals in Sarawak is explored in this paper.