Impervious surfaces affect the ecosystem function of watersheds. Therefore, the impervious surface area percentage (ISA%) in watersheds has been regarded as an important indicator for assessing the health status of watersheds. However, accurate and frequent estimation of ISA% from satellite data remains a challenge, especially at large scales (national, regional, or global). In this study, we first developed a method to estimate ISA% by combining daytime and nighttime satellite data. We then used the developed method to generate an annual ISA% distribution map from 2003 to 2021 for Indonesia. Third, we used these ISA% distribution maps to assess the health status of Indonesian watersheds according to Schueler’s criteria. Accuracy assessment results show that the developed method performed well from low ISA% (rural) to high ISA% (urban) values, with a root mean square difference value of 0.52 km2, a mean absolute percentage difference value of 16.2%, and a bias of −0.08 km2. In addition, since the developed method uses only satellite data as input, it can be easily implemented in other regions with some modifications according to differences in light use efficiency and economic development in each region. We also found that 88% of Indonesian watersheds remain without impact in 2021, indicating that the health status of Indonesian watersheds is not a serious problem. Nevertheless, Indonesia’s total ISA increased significantly from 3687.4 km2in 2003 to 10,505.5 km2in 2021, and most of the increased ISA was in rural areas. These results indicate that negative trends in health status in Indonesian watersheds may emerge in the future without proper watershed management.