Ecohydrology is the most basic science for guiding integrated watershed management. Rapid urbanization permanently alters land cover and the structure and functions of terrestrial ecosystems in a short period of time. Consequently, urbanization affects hydrological processes such as surface evaporation, runoff, and local and regional climate, and ecosystem services (e.g., water supply, carbon sequestration, biodiversity). Urbanization directly affects the physical properties of the near-surface atmosphere, the energy exchange between land and atmosphere, and the water budget of the ecosystems. These changes bring or aggravate a series of water quantity, water quality, and climatic effects, e.g., heat island, dry island, wet island, rain island, and turbid island. This study systematically summarized the research progress in understanding the impacts of urbanization on watershed ecohydrological processes with a focus on the consequences of urbanization on surface energy balance, water balance, water quality and aquatic organisms, and the meteorological effects of urban land use/cover change. The most direct impact of urban land use/cover change on the environment is the alternation of the energy and water balance at multiple scales. The unique physical properties of the urban surface and associated energy balance distribution characteristics are different from natural ecosystems, resulting in unique microclimate and eco-hydrology in an urban environment. Urbanization-driven surface processes have direct or indirect impacts on hydrological processes such as runoff, infiltration, evapotranspiration, groundwater recharge, and river network confluence at different scales by increasing impervious surface and changing vegetation cover conditions. Large-scale urbanization aggravates the peak flow, rainstorm runoff, and annual total water yield as a result of evapotranspiration reduction caused by the significant reduction of vegetation and surface soil infiltration rate. The influence of urbanization on non-point source water pollution is mainly reflected in the change of ‘source’, ‘process’, and ‘sink’ of non-point source pollutants. Urbanization aggravates water quality problems by the increase in impervious surface that elevates pollutant concentration and load and alters physical and chemical processes in aquatic systems. Large-scale conversion of forest lands to urban uses leads to a significant reduction in evapotranspiration, which reduces its ‘biological drainage’ function, coupled with an increase in the impervious surface, and is likely to exacerbate the risk of flooding or the risk of ‘light rainstorms, heavy waterlogging’ phenomena in urban watersheds. The conversions of vegetated ecosystems reduce their ‘air conditioner’ functions and are likely to exacerbate the ‘urban heat island’ and ‘urban dry island’ effects. We summarized measures and strategies centered on ‘Low Impact Development’ to mitigate the urbanization risks through reducing extreme hydrological effects of impervious surface, enhancing the regulating function of natural ecosystems, and implementing the Urban Best Management Practices at a watershed scale. We concluded that future urban ecohydrological science should focus on the studying the mechanisms of ‘Low Impact Development’ and ‘Nature-based Solutions’ in mitigating environmental impacts from the perspectives of water and energy balances and biogeochemical cycling at multiple scales.