This paper investigates how variation in forest structural characteristics affects the water retention capacity of gaps and forests in fir-beech forests in the Dinaric Karst. Forests are identified as a key element of the landscape for provision of pristine water resources, particularly in highly vulnerable karst aquifers characterized by rapid infiltration of recharge water, high subsurface permeability, and heterogeneous underground flow. Indicators of hydrologic fluxes (drainage flux, canopy interception, transpiration, and soil evaporation) in a large experimental gap (approximately 0.2 ha in size) and those in a nearby old-growth gap were compared over a 13-year period using the Brook90 hydrological model and their structural characteristics were analyzed. In addition, the hydrologic fluxes were also simulated for a managed forest and an old-growth forest for reference. Water regulation capacity was lowest in the experimental gap, where drainage flux accounted for 81% of precipitation and the sum of canopy interception, transpiration, and soil evaporation (evapotranspiration) accounted for 18%. This was followed by the old-growth gap, where drainage flux accounted for 78% of precipitation and evapotranspiration for 23%. Water retention capacity was highest and generally similar for both forests, where 71–72% of annual precipitation drained to the subsurface. The results of this study suggest that the creation of large canopy gaps in fir-beech forests in the Dinaric Karst results in significant and long-lasting reduction in soil and vegetation water retention capacity due to unfavorable conditions for successful natural tree regeneration. For optimal provision of water regulation ecosystem services of forests in the Dinaric Karst, small, irregularly shaped canopy gaps no larger than tree height should be created, mimicking the structural characteristics of naturally occurring gaps in old-growth forests.