The land systems between the humid and arid zones around the globe are critical to agricultural production and are characterized by a strong integration of the land use and water dynamics. In the southern Great Plains (SGP) of the United States, lakes and farm ponds are essential components in the land systems, and they provide unique habitats for wildlife, and critical water resources for irrigation and municipal water supplies. The conversion of the marginal grasslands to switchgrass (Panicum virgatum) biofuel feedstock for energy production has been proposed in the region. However, we have limited experimental data to assess the impact of this potential land-use change on the surface runoff, which is the primary water source for surface impoundments. Here, we report the results from a paired experimental watershed study that compared the runoff and sediment responses that were related to the conversion of prairie to a low-input biomass production system. The results show no significant change in the relationship between the event-based runoff and the precipitation. There was a substantial increase in the sediment yield (328%) during the conversion phase that was associated with the switchgrass establishment (i.e., the site preparation, herbicide application, and switchgrass planting). Once the switchgrass was established, the sediment yield was 21% lower than the nonconverted watershed. Our site-specific observations suggest that switchgrass biofuel production systems will have a minimum impact on the existing land and water systems. It may potentially serve as an environmentally friendly and economically viable alternative land use for slowing woody encroachment on marginal lands in the SGP.