Despite broad interest in using payment for ecosystem services to promote changes in the use of natural capital, there are few expost assessments of impacts of payment for ecosystem services programs on ecosystem service provision, program cost, and changes in livelihoods resulting from program participation. In this paper, we evaluate the Paddy Land-to-Dry Land (PLDL) program in Beijing, China, and associated changes in service providers' livelihood activities. The PLDL is a land use conversion program that aims to protect water quality and quantity for the only surface water reservoir that serves Beijing, China's capital city with nearly 20 million residents. Our analysis integrates hydrologic data with household survey data and shows that the PLDL generates benefits of improved water quantity and quality that exceed the costs of reduced agricultural output. The PLDL has an overall benefitcost ratio of 1.5, and both downstream beneficiaries and upstream providers gain from the program. Household data show that changes in livelihood activities may offset some of the desired effects of the program through increased expenditures on agricultural fertilizers. Overall, however, reductions in fertilizer leaching from land use change dominate so that the program still has a positive net impact on water quality. This program is a successful example of water users paying upstream landholders to improve water quantity and quality through land use change. Program evaluation also highlights the importance of considering behavioral changes by program participants.social-ecological systems | sustainable household livelihoods | watershed management | sustainability | regional collaboration P ayment for ecosystem services (PES) can serve as an effective mechanism to translate external, nonmarket values of ecosystem services into financial incentives for local actors to provide such services (1), and has been highlighted as an innovative approach to integrate conservation and socioeconomic development (2-4). In principle, when the benefits derived from increased provision of ecosystem services exceed the cost of provision, PES mechanisms can make both ecosystem service beneficiaries and providers better off. Despite considerable promise and interest in the use of PES worldwide and increasing assessments of the benefits and costs of PES programs, there is little documentation of resulting changes in program participants' livelihoods. Livelihood changes can alter the total effect of a program through unintended changes in an area's economic structure or other natural capital assets (5-8). Taking stock of these socioeconomic impacts highlights the dynamic and distributional effects of PES programs, and is necessary for understanding the equity implications and overall efficiency of a program.Beijing faces a water crisis requiring urgent solutions, and PES programs are one strategy being used to protect water resources. The Miyun Reservoir is the only surface water source for domestic water in Beijing. Its main purpose is to supply...