The establishment of small hydropower schemes has become a lucrative business today considering streams and rivers as hydraulic systems rather than living ecosystems. It is assumed that the negative effects of construction and operation of small hydropower are small because of relatively small generation capacities in comparison to large hydropower projects. The operation of small hydropower plants in Kelani River basin was investigated with special emphasis on power generation capacities and affected stream stretches between the intake weir and the powerhouse. Detailed studies were conducted at Wee Oya, a major tributary of the Kelani on habitat alteration and fish fauna endemic to Sri Lanka in relation to small hydropower operation. The Kelani River has 31 mini hydropower plants with total generation capacity of 56 MW ranging from 0.060 MW to 9.928 MW per power plant. The results show that the length of the affected stream stretch is a function of the generation capacity of the power plant. The percentage of natural stream loss is high in Kehelgamu Oya (60.3 %) and Maskeliya Oya (62.9%) due to previously established major hydropower schemes whereas the high percentage of natural stream loss computed for Seethawaka Ganga (43.8 %) can be attributed to the large number of mini hydropower plants. A marked decline in fish population and a number of endemic fish species were found in the Wee Oya, which has four operational mini hydropower plants within 24 km stream length with 32.5% loss of natural stream. Although, 18 endemic fish species have been recorded from the Kelani River basin, only three species were reported from the Wee Oya during the present study.