Tropical peatlands are increasingly under pressure from agriculture, urbanisation and industry. These human interventions all require drainage of peatlands which are naturally waterlogged. Drainage of peatlands starts the process of soil subsidence. Part of the total subsidence is caused by oxidation resulting in CO2 emission to the atmosphere and thus contributing to an accelerating increase in greenhouse gases in the atmosphere. The type of land use determines the optimal drainage depth to grow a specific crop and thereby determines the subsidence rate under a given type of land use. Interrelationships between soil and water in tropical peatlands are thus crucial in describing the functioning of a peatland ecosystem. This study reports on the interrelationships between soil and water as investigated in the Air Hitam Laut watershed in Jambi Province, Sumatra, Indonesia. A large part of this watershed bisects Berbak National Park which under Indonesian law is a protected wetland and an internationally recognised Ramsar site. The hydrology of the watershed was modelled with an existing model that combines groundwater and surface water flow. Considerable attention has been given to the collection of input data required by the model including the elevation of the watershed, groundwater levels and rainfall data. Data collection is a time consuming activity due to the inaccessibility of peatlands. Model outcome was calibrated and validated using measured groundwater levels at representative sites in the watershed, measured discharge in the Air Hitam Laut river and flooding patterns as deducted from radar images. The eco-hydrological model was used to evaluate the consequences of three realistic future scenarios: i) expansion of oil palm plantation in the upper catchment of the Air Hitam laut river, ii) expansion of agriculture downstream and iii) continuing fire damage. Oil palm development requires drainage and thus induces subsidence of the peat surface. After 50 years of continuing subsidence, the areas under oil palm cultivation upstream, will be located below the drainage basis of the Air Hitam Laut river. The water flow in the upper half of the Air Hitam Laut river basin will be changed and will directly drain to the lower lying Kumpeh river. Consequently, the upstream area gets decoupled from the rest of the watershed and will no longer provide water required to keep the peatland further downstream waterlogged. River water available for agriculture at the river mouth will be dramatically reduced leading to droughts. Agriculture expansion downstream causes subsidence resulting in surfacing of the underlying, problematic acid sulphate soils. In addition damage from salt intrusion will increase in the coastal area especially when the river flows are reduced. If areas prone to fire will actually burn, the total inundated areas will expand with a factor five. Deep and prolonged flooding will limit possible restoration efforts. This study shows the significant relations between land-use (clearance of forest, agriculture and accompanying drainage) in the upper-catchment of the Air Hitam Laut river basin and the peatland forest ecology downstream, including enhanced drought conditions and increased vulnerability to fires. As such it demonstrates that in peat soils the hydrology is a key factor in determining the functioning of the peatland ecosystem.