Permafrost dynamics impact hydrologic cycle processes by promoting or impeding groundwater and surface water exchange. Under seasonal and decadal air temperature variations, permafrost temperature changes control the exchanges between groundwater and surface water. A coupled heat transport and groundwater flow model, SUTRA, was modified to simulate groundwater flow and heat transport in the subsurface containing permafrost. The northern central Tibet Plateau was used as an example of model application. Modeling results show that in a yearly cycle, groundwater flow occurs in the active layer from May to October. Maximum groundwater discharge to the surface lags the maximum subsurface temperature by two months. Under an increasing air temperature scenario of 3°C per 100 years, over the initial 40-year period, the active layer thickness can increase by three-fold. Annual groundwater discharge to the surface can experience a similar three-fold increase in the same period. An implication of these modeling results is that with increased warming there will be more groundwater flow in the active layer and therefore increased groundwater discharge to rivers. However, this finding only holds if sufficient upgradient water is available to replenish the increased discharge. Otherwise, there will be an overall lowering of the water table in the recharge portion of the catchment.