Early-successional forest habitat (ESFH), characterized by dense, short-statured woody vegetation, abundant and diverse herbaceous vegetation and high productivity-to-biomass ratios, supports diverse and productive terrestrial faunal communities. In upland forested areas, small watersheds, encompassing ecologically interconnected terrestrial and freshwater habitats, are fundamental units of the landscape for managing and protecting terrestrial and aquatic biodiversity. However, little is known about how the occurrence or abundance of upland ESFHs affects linkages between aquatic and terrestrial species and communities in these small watersheds. It is likely that the presence of ESFH in small watersheds affects the magnitude and direction of aquatic-terrestrial linkages, which may, in turn, affect overall biodiversity. We conducted a literature review of current information on aquatic and terrestrial biodiversity in small watersheds as related to forest age and structure. While the review identifies some fundamental uncertainties and information gaps, there is no evidence of negative effects of the creation and maintenance of upland ESFH on aquatic and riparian diversity. Increased aquatic production, due to higher light and nutrients, and increased primary and secondary production in ESFHs have the potential to increase watershed biodiversity. The review underscores the need for systematic evaluation of these potential outcomes to inform the management community.