The 2006 completion of the circum-island Compact Road on the island of Babeldaob in the Republic of Palau resulted in several deforested stream reaches with modified stream channels. To determine the impacts of deforestation and road construction, various ecosystem parameters were compared between road-impacted reaches, reforested savanna reaches, and forested reaches. Compared to adjacent forested reaches, road-impacted reaches received significantly more light (0.4 ± 0.1 vs. 87.8 ± 4.1 % light transmittance, respectively), were significantly warmer (25.7 ± 0.1 vs. 26.1 ± 0.1°C, respectively), and received higher nutrient and sediment loads, all of which were attributed to the removal of riparian vegetation and increased surface runoff from the road. These differences were believed to have shifted the benthic algal community in road-impacted reaches from diatoms to filamentous algae with significantly greater chl a biomass (10×) and benthic algal ash free dry mass AFDM (3×) compared to adjacent forested reaches. Savanna-impacted and forested reaches had similar chl a, algal AFDM, and received similar amounts of light. Nutrient and sediment concentrations varied between the two reach types. Results from this study emphasize the need for the maintenance of riparian forests especially with predicted increases in population, development, and deforestation. Future studies are needed to determine effective riparian widths and riparian forest community structure to help resource managers and land owners protect and preserve the many ecosystem services that Palauan streams and watersheds provide.