Terraced slopes are widely used in the Loess Plateau to control gully erosion, yet their potential to induce new erosion patterns remains overlooked. Here we used unmanned aerial vehicle (UAV) photogrammetry to obtain centimeter‐resolution digital surface models (DSMs) and derived hydrological networks, slopes, aspects, and curvatures of the terraced slopes. Our analysis reveals terraces disrupted natural water pathways, spurring new rill formations during each rainy season—a process neglected by models. Intriguingly, despite gentler gradients, terraced slopes exhibited higher erosion rates than steeper gullies, with widespread rills on terrace ridges. Vegetation‐induced deposition surpassed erosion by 1.52 times, but moisture evaporation on sunny slopes limited plant growth and enhanced erosion. We propose targeted strategies tailored to these erosion mechanisms, including terrace redesign, runoff diversion, slope strengthening, and suitable vegetation, advancing sustainable land management. However, this study faces limitations due to the reliance on drone photogrammetry, which may be influenced by environmental factors like varying solar angles and vegetation growth, and the lack of extensive field validation to support the UAV‐derived data. Our study spotlights drone photogrammetry's potential for elucidating complex erosion dynamics on terraced slopes.