Key to Bhutan’s economic development strategy is the expansion of the country’s hydropower projects, which requires the construction of a number of large dams. As dams affect the natural hydrological regime of rivers, the objective of this study was to assess these impacts on water quality and macroinvertebrate communities. Baseline physical and chemical properties of rivers in central Bhutan were gathered to provide spatial context for hydrological change associated with hydropower development. Physico-chemical measures from central Bhutan rivers suggested that aquatic macroinvertebrate communities are not currently impacted1 by poor water quality. An in situ experiment using flow diversion barriers in Chamkharchu at Jakar (Bumthang) was conducted to assess the short-term impacts of reduced water velocity on benthic macroinvertebrate communities to simulate the impacts of flow velocity changes associated with reaches downstream of hydropower facilities. We found benthic macroinvertebrate taxa abundance, richness and diversity were not significantly different between high and low flow velocity treatments, but community composition was significantly different between before and after the construction of flow diversion barriers, with reduced abundance of rheophilic (flow-dependent) taxa in treatments with reduced velocity. Current impacts of hydropower facilities are focused on the construction phase. This study has highlighted that the operation of hydropower facilities can also impact the ecological condition of rivers, and that these long-term impacts must be included in the decision making processes for hydropower development. Further investigation is warranted to determine how wide-ranging these impacts will be throughout Bhutan.