Mill Brook, which gives the mountain to the west its name, rises from the hollow on the northeast. It is joined by an unnamed tributary which flows into it from Clark Hollow. All the streams that rise on Balsam Lake Mountain are part of the Delaware River's watershed. Mill Brook on the north slopes feeding that river's East Branch directly at Pepacton Reservoir, making it part of New York City's water supply. Water from the southern streams drains into the Beaver Kill not far below the mountain, which itself reaches the East Branch at East Branch well below the reservoir's dam at Downsville.