Small hydroelectric power (SHP) facilities are proliferating around the world, including in Brazil where legislation encourages SHP over other hydropower development, defining SHP as facilities with installed capacities of 3–30 MW and reservoirs <13 km2. SHP facilities are often diversion designs with small or no reservoirs, while other SHPs have more conventional dams that create extensive reservoirs. This study seeks to understand the relative impacts of these two different designs on downstream water quality, comparing a conventional SHP system on the main stem to a complex of smaller SHPs with diversion designs in lower‐order reaches of the São Lourenço River. This river delivers nutrients and sediments to the Pantanal, one of the world's largest floodplain ecosystems. Samples collected upstream and downstream of each set of facilities over a range of flows revealed that the conventional SHP reservoir significantly reduced pH, dissolved oxygen, total iron, suspended solids, and turbidity consistent with observations in many other reservoirs. In contrast, water quality changes downstream of the smaller SHPs were less pronounced and could be attributable to natural variability. An analysis of energy production versus water quality impacts suggests that SHPs on the smaller tributaries are favorable compared to the conventional SHP in terms of water quality impacts. With the proposed addition of dozens of new facilities in the upland watersheds draining into the Pantanal, this study improves our understanding of the relative impacts of different designs of SHPs on downstream water quality, while recognizing that water quality is just one of several potential impacts to be considered.