Public concern about adequate supplies of clean water led to the establishment in 1891 of federally protected forest reserves. The Forest Service Natural Resources Agenda is refocusing the agency on its original purpose. Forests are key to clean water. About 80 percent of the Nation's scarce freshwater resources originate on forests, which cover about one-third of the Nation's land area. The forested land absorbs rain, refills underground aquifers, cools and cleanses water, slows storm runoff, reduces flooding, sustains watershed stability and resilience, and provides critical habitat for fish and wildlife. In addition to these ecological services, forests provide abundant water-based recreation and other benefits that improve the quality of life. Use and development of the water resources of the United States underwent major changes during the 19th century in response to the growing demands of a population that had increased nearly 20-fold since the founding of the country. Westward expansion, and navigable rivers, canals, and harbors for transportation transformed the Nation's economy. As the Nation experienced this period of massive development, major problems emerged from overuse and poor management of its water resources: Urban water supplies were a major source of disease; The capacity of many lakes and streams to assimilate wastes was exceeded; The survival of people living in arid or flood-prone areas depended on unpredictable precipitation patterns. The 1897 Organic Administrative Act said these forest reserves were to protect and enhance water supplies, reduce flooding, secure favorable conditions of water flow, protect the forest from fires and depredations, and provide a continuous supply of timber By 1915, national forests in the West had been established in much the form they retain today. These national forests, which included 162 million acres in 1915, were essentially carved out of the public domain. At that time, few Federal forests were designated in the East because of the lack of public domain. Public demands for eastern national forests resulted in passage of the 1911 Weeks Act, authorizing the acquisition of Federal lands to protect the watersheds of navigable streams. From 1911 to 1945, about 24 million acres of depleted farmsteads, stumpfields, and burned woodlands were incorporated into the eastern part of the National Forest System. This report focuses on the role of forests in water supply-including quantity, quality, timing of release, flood reductions and low flow augmentation, economic value of water from national forest lands, and economic benefits of tree cover for stormwater reduction in urban areas.