The future of the Western United States is threatened by both an increase in wildfire frequency and a decrease in water availability. By reducing fuel loads, wildfire mitigation measures (forest treatments) can offer reduced fire severity and increased annual total runoff (water yield) via reduction in evapotranspiration (ET). While the benefits of forest treatments for fire management are well studied, their impact on ET and water yield remains largely unknown, and existing literature shows conflicting results. Here, we aim to resolve this ambiguity by quantifying the impact of forest treatments on ET and water yield, at spatially localized scales. Using daily average flow rates from sub‐basin and basin scale gauges, 100‐m LiDAR data, 800‐m PRISM precipitation data and 30‐m SSEBop ETa data, we analysed the impact of forest treatments on ETa and water yield in the Sagehen Experimental Watershed. Within treated areas of Sagehen, there is a linear relationship between loss of canopy cover and ETa reductions at the 100‐m pixel scale when canopy cover loss exceeds 10%. The impact of treatment was highly localized, and across the entire watershed (30 km2), treated areas with reduced ETa only made up 4 km2, ~10% of the Sagehen area. At sub‐basin and basin scale, the magnitude of year‐to‐year ETa reduction was <15%, and there was no quantifiable increase in water yield. Instead, precipitation alone explained ≥85% of water yield variability at sub‐basin and basin scale. Future forest management practices in the Sierra Nevada are essential for combating wildfire, but our results from Sagehen reveal that even at the sub‐basin scale (~3 km2), 56% thinning treatment by area did not result in increased water yield.