Selective logging, fragmentation, and understory fires directly degrade forest structure and composition. However, studies addressing the effects of forest degradation on carbon, water, and energy cycles are scarce. Here, we integrate field observations and high-resolution remote sensing from airborne lidar to provide realistic initial conditions to the Ecosystem Demography Model (ED-2.2) and investigate how disturbances from forest degradation affect gross primary production (GPP), evapotranspiration (ET), and sensible heat flux (H). We used forest structural information retrieved from airborne lidar samples (13,500 ha) and calibrated with 817 inventory plots (0.25 ha) across precipitation and degradation gradients in the eastern Amazon as initial conditions to ED-2.2 model. Our results show that the magnitude and seasonality of fluxes were modulated by changes in forest structure caused by degradation. During the dry season and under typical conditions, severely degraded forests (biomass loss ≥66%) experienced water stress with declines in ET (up to 34%) and GPP (up to 35%) and increases of H (up to 43%) and daily mean ground temperatures (up to 6.5°C) relative to intact forests. In contrast, the relative impact of forest degradation on energy, water, and carbon cycles markedly diminishes under extreme, multiyear droughts, as a consequence of severe stress experienced by intact forests. Our results highlight that the water and energy cycles in the Amazon are driven by not only climate and deforestation but also the past disturbance and changes of forest structure from degradation, suggesting a much broader influence of human land use activities on the tropical ecosystems. Plain Language Summary In the Amazon, timber extraction and forest fires ignited by people are the chief causes of damages that we call forest degradation. Degradation is as widespread as deforestation and changes how forests behave. Degraded forests may pump less water to the atmosphere and absorb less carbon dioxide from the atmosphere. To understand the differences in behavior between degraded and intact forests, we used high-resolution scanning laser data collected from aircraft flights over regions in the Amazon where we knew if and when forests were degraded. Then, we provided these data to a computer program that calculates the exchange of water and carbon between the forest and the atmosphere. We found that, during the dry season, degraded forests are 6.5°C warmer, pump one-third less water (i.e., 400,000 L ha −1 month −1), absorb one-third less carbon (i.e., 1 tonC ha −1 month −1), and show higher fire risk than intact forests. To our surprise, when the Amazon is hit by severe droughts, intact forests start to behave like degraded forests, because all forests run out of water and become hot. Our results are important because they show that forest degradation caused by people can have large impacts on dry-season climate and favor more fire, especially during typical, nondrought years.