Resource retention is an important component of landscape function in semi-arid environments, with patches in the landscape serving as sink zones that capture runoff, sediments and nutrients sourced from inter-patch areas. The purpose of this rainfall simulation study was to compare hydrological and erosional responses in patches and inter-patches in woody encroachment areas (trees and shrubs >700 stems ha⁻¹) in semi-arid south-eastern Australia. Ground cover, hydrological and erosional responses differed consistently between patches and inter-patches. Inter-patches had low ground cover and produced more runoff and sediment than patches with medium to high ground cover. Patches displayed delayed initiation of runoff and a deeper soil wetting front. Litter, cryptogam cover and surface sand content were the main variables controlling average runoff rate, sediment concentration and total sediment production. The results indicated that patches and inter-patches are different functional units from an eco-hydrological perspective and influence the hydrologic and erosional characteristics of woody encroached areas.