Sloped areas calculated from a GIS raster file, such as a digital elevation model, are smaller than the true surface area, because they are projected to a planimetric plane. In mountainous regions this sloped area under-estimation (SAUE) can have significant consequences on hydrological calculations. A sensitivity analysis is conducted, using the ACRU agro-hydrological modelling system in a small watershed in Glacier National Park, Montana, USA, to investigate the sensitivity of the SAUE on key elements of the hydrological cycle, including precipitation depth, April snow depth, August soil moisture deficit, actual evapotranspiration depth, and runoff depth. The sensitivity analysis is based on 224 unique combinations of slope, soil and land cover types, elevation with associated precipitation depths, and north and south facing radiation regimes. Results revealed an increasing influence of the SAUE on all hydrological processes with increasing slope steepness. Distinct differences and magnitudes between different land cover types, different elevations, and, in particular, different exposition were quantified. Actual evapotranspiration increases with SAUE, while runoff decreases. April soil water is simulated to decrease with an increase in SAUE. Finally, a comparison of a streamflow simulation of a small and steep alpine watershed with and without consideration of the SAUE is carried out. The sloped area of the small watershed is under-estimated by 20·9%, and the difference in simulated runoff is 12·3%. When the SAUE was not considered, runoff was simulated to be higher, the associated coefficient of determination was slightly lower, and the slope of the regression line was flatter. Copyright © 2010 John Wiley & Sons, Ltd.