This paper investigates the controls of vegetation on runoff and erosion dynamics in the dryland environment of Jornada, New Mexico, USA. As the American southwest has seen significant shifts in the dominant vegetation species in the past 150 years, an understanding of the vegetation effects on hydrological and erosional processes is vital for understanding and managing environmental change. Small-scale rainfall simulations were carried out to identify the hydrological and erosional processes resulting from the grassland and shrubland vegetation species. Results obtained using tree-regression analysis suggested that the primary vegetation control on runoff and erosion is the shrub type and canopy density, which directly affects the local microtopographic gradient of mounds beneath the shrubs. Significant interactions and feedbacks were found to occur among the local mound gradient, crust cover, soil aggregate stability and antecedent soil moisture between the different vegetation species for both the runoff and erosion responses. Although some of the shrub species were found to produce higher sediment yields than the grass species, the distinguishing feature of the grassland was the significantly higher enrichment in the fine sediment fraction compared to all other surface cover types. This enrichment in fines has important implications for nutrient movement in such environments. Copyright © 2009 John Wiley & Sons, Ltd.