1. Tropical rivers are increasingly being altered by hydropower dams. In Costa Rica, more than 30 hydropower plants were built during the 1990s and more dams are being proposed. Hydropower dams currently provide more than 80% of electricity consumed by the country’s 4 million residents, yet most of Costa Rica’s hydropower potential remains untapped. 2. Ecological consequences of dams in Costa Rica stem primarily from river fragmentation, stream de-watering, and downstream hydrological alterations. Dams affect distribution and abundance of aquatic biota, especially migratory species. Cumulative effects of multiple dams on individual river basins, especially in the northern part of the country, are also of concern but have not been adequately documented. 3. In light of recent hydropower development, we recommend conservation strategies that protect remaining free-flowing rivers, call for assessment of ecological impacts of dams on a broader scale, encourage research on aquatic systems and sustainable hydropower technologies, and promote the development of methods for estimating environmental flows for Costa Rican rivers. Copyright # 2006 John Wiley & Sons, Ltd.