By applying of forest watershed hydrological model (FCHM), this paper simulated the forest hydrological effects in Pingtong and Liujia watersheds of the upper reaches of Yangtze River. With the increase of forest cover (FR), the canopy interception and soil infiltration capacity were improved; as a result, the surface runoff(Rs) decreased and rapid flow converted into slow flow，and the time period needed for runoff accumulation delayed, so that the flood peak was alleviated. For example, with forest cover, the flooding control criteria for Pingtong watershed decreases to 3380m3/s from 4520m3/s (without forest cover). indicating the existence of forest can enhance the flooding control capacity of the watershed. The different characteristics of the two watersheds, the major runoff components in Pingtong watershed are shallow runoff (Rs) and deep runoff (Rp),but are dominated by interflow (Ri) in Liujia watershed. All of these components increase with the increasing FR. The different runoff components brought different moisture conditions, as the result,the evapo-transpiration show different trends with the increase of FR. In Pingtong watershed, with the increase of FR, the evapo-transpiration decreased from 373.3 mm to 289.3 mm but runoff went up, resulting in a positive effect of 237%. In Liujia watershed, higher FR resulted in the increase of the evapo-transpiration and the decrease of runoff, resulting in a negative effect of -8.6％.