The valley is fed by the Tuolumne River, Falls Creek, Tiltill Creek, Rancheria Creek and numerous smaller streams which collectively drain a watershed of . In its natural state, the valley floor was marshy and often flooded in the spring when snow melt in the high Sierra cascaded down the Tuolumne River and backed up behind the narrow gorge which is now spanned by O'Shaughnessy Dam. The entire valley is now flooded under an average of water behind the dam, although it occasionally reemerges in droughts, as it did in 1955, 1977 and 1991.