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Flows from river basins in northwestern Canada have been rising in the last two decades as a result of climate warming. In the wetland‐dominated basins that characterise the southern margin of permafrost, permafrost thaw and disappearance, and resulting land‐cover change, is occurring at an unprecedented rate. The impact of this thaw on runoff generation in headwater basins is poorly understood. Permafrost thaw has the potential to fundamentally alter the cycling and storage of moisture inputs in this region by altering the type and relative proportions of the major land‐cover types, such as peat plateaus, channel fens and flat bogs. This paper examines streamflow changes in the four Water Survey of Canada gauged river basins (152–2050 km²) in the lower Liard River valley, Northwest Territories, Canada, a region where permafrost thaw has produced widespread loss of forest and concomitant expansion of permafrost‐free wetlands. Annual runoff in the lower Liard Valley increased by between 112 and 160 mm over the period of 1996–2012. The Mann‐Kendall non‐parametric statistical test and the Kendall‐Theil robust line were used to ascertain changes in streamflow. Historical aerial photographs from 1977 and high‐resolution satellite imagery (WorldView 2) from 2010 were used to measure the rate and pattern of permafrost thaw in a representative 6 km² area of Scotty Creek. Permafrost thaw‐induced land‐cover change is both increasing the adjacency between runoff producing and transmitting land cover types and transforming certain land covers that store water into ones that produce runoff. This land‐cover change was found to be the single most important factor (37–61 mm) contributing to the observed increase in river discharge. Other contributing factors include increases in plateau runoff contributing areas (20–32 mm), increases in annual effective precipitation depth (18–30 mm), contribution of water from the melt of ice within permafrost (9 mm) and increases in baseflow (0.9–6.8 mm). Although runoff has significantly (p
