Responses of hydrological processes to climate change are key components in the Intergovernmental Panel for Climate Change (IPCC) assessment. Understanding these responses is critical for developing appropriate mitigation and adaptation strategies for sustainable water resources management and protection of public safety. However, these responses are not well understood and little long-term evidence exists. Herein, we show how climate change, specifically increased air temperature and storm intensity, can affect soil moisture dynamics and hydrological variables based on both long-term observation and model simulations using the Soil and Water Assessment Tool (SWAT) in an intact forested watershed (the Dinghushan Biosphere Reserve) in Southern China. Our results show that, although total annual precipitation changed little from 1950 to 2009, soil moisture decreased significantly. A significant decline was also found in the monthly 7-day low flow from 2000 to 2009. However, the maximum daily streamflow in the wet season and unconfined groundwater tables have significantly increased during the same 10-year period. The significant decreasing trends on soil moisture and low flow variables suggest that the study watershed is moving towards drought-like condition. Our analysis indicates that the intensification of rainfall storms and the increasing number of annual no-rain days were responsible for the increasing chance of both droughts and floods. We conclude that climate change has indeed induced more extreme hydrological events (e.g. droughts and floods) in this watershed and perhaps other areas of Southern China. This study also demonstrated usefulness of our research methodology and its possible applications on quantifying the impacts of climate change on hydrology in any other watersheds where long-term data are available and human disturbance is negligible.