Glaciers in the Cordillera Blanca, Peru, are undergoing rapid retreat, in large part due to climate change. These changes are significantly altering water availability in the region and pose critical risks to local populations that are highly dependent on these resources for livelihoods. We examine these issues through an interdisciplinary and linked evaluation of hydrological change and livelihood vulnerability in the Yanamarey watershed. Physical observations of the Yanamarey glacier show acceleration in frontal retreat at a rate of 8 m decade-1 since 1970, accompanied by total volume loss on the order of 0.022 km3. Hydrological and hydrochemical analyses document a possible transformation of stream flow over the past decade as the seasonal storage capacity of the glacier has degraded. Recent stream discharge measurements from the proglacial lake below the glacier are more coincident with the highly variable seasonal precipitation than they were during the 1998–1999 hydrological year. Local household perceptions of glacier recession and seasonal hydrological variability agree with this trend, which is increasing human vulnerability in the watershed. Household case-study survey results demonstrate that shifting water resources, increasing weather extremes and climate-related threats to tourism are all new vectors of vulnerability for household livelihoods.