Biological soil crusts (BSCs) are the dominant living cover in many drylands of the world. They possess many features that can influence different aspects of local hydrologic cycles, including soil porosity, absorptivity, roughness, aggregate stability, texture, pore formation, and water retention. The influence of biological soil crusts on these factors depends on their internal and external structure, which varies with climate, soil, and disturbance history. This paper presents the different types of biological soil crusts, discusses how crust type likely influences various aspects of the hydrologic cycle, and reviews what is known and not known about the influence of biological crusts on sediment production and water infiltration versus runoff in various drylands around the world. Most studies examining the effect of biological soil crusts on local hydrology are done by comparing undisturbed sites with those recently disturbed by the researchers. Unfortunately, this greatly complicates interpretation of the results. Applied disturbances alter many soil features such as soil texture, roughness, aggregate stability, physical crusting, porosity, and bulk density in ways that would not necessarily be the same if crusts were not naturally present. Combined, these studies show little agreement on how biological crusts affect water infiltration or runoff. However, when studies are separated by biological crust type and utilize naturally occurring differences among these types, results indicate that biological crusts in hyperarid regions reduce infiltration and increase runoff, have mixed effects in and regions, and increase infiltration and reduce runoff in semiarid cool and cold drylands. However, more studies are needed before broad generalizations can be made on how biological crusts affect infiltration and runoff. We especially need studies that control for sub-surface soil features such as bulk density, micro- and macropores, and biological crust structure. Unlike the mixed effects of biological crusts on infiltration and runoff among regions, almost all studies show that biological crusts reduce sediment production, regardless of crust or dryland type.