Headwater catchments in the mixed‐conifer zone of the American and Merced River basins were selectively thinned in 2012 to reduce the risk of high‐intensity wildfire. Distributed observations of forest vegetation thinning, precipitation, snowpack storage, soil water storage, energy balance, and stream discharge from 2010 to 2013 were used to calculate the water balance and constrain a hydroecologic model. Using the spatially calibrated RHESSys model, we assessed thinning effects on the water balance. In the central‐Sierra American River headwaters, there was a mean‐annual runoff increase of 14% in response to the observed thinning patterns, which included heterogeneous reductions in leaf area index (–8%), canopy cover (–3%), and shrub cover (–4%). In the southern‐Sierra Merced River headwaters, thinning had little impact on forest structure or runoff, as vegetation growth in areas not thinned offset reductions from thinning. Observed thinning effects on runoff could not be confirmed in either basin by measurements alone, in part because of the high variability in precipitation during the measurement period. Modeling results show that when thinning is intensive enough to change forest structure, low‐magnitude vegetation reductions have greater potential to modify the catchment‐scale water balance in the higher‐precipitation central Sierra Nevada versus in the more water‐limited southern Sierra Nevada. Hydrologic modeling, constrained by detailed, multiyear field measurements, provides a useful tool for analyzing catchment response to forest thinning.