A spatially distributed water balance model was used to assess the influence of regional land use and land cover change in a poorly gauged basin for the years 1975 and 2000. To carry out this study in the Cuitzeo Lake basin in Michoacan, Mexico, remote sensing and geographic information system tools were integrated in the water balance model. In addition, a transition matrix analysis was used to determine the dynamic change of categories of related hydrologic processes. The analysis of the water balance components, based on landforms and transition matrix, indicated a tendency of improvement in the regional hydrologic conditions in the basin. As a consequence of urban land use growth, however, plains and footslopes of the basin showed an increase of runoff values. In addition, in both years, the topographic lower sections of the basin exhibited a high demand for water from the increased urban land use, along with degradation of Cuitzeo Lake, particularly by pollution and reduction of water supply. The approach used here is suitable for understanding the change in quantity and spatial distribution of water available in poorly gauged basins.