In dryland ecosystems, runoff is mainly generated in bare areas, which are also more susceptible to water erosion than vegetated areas. These bare areas are often covered and protected by biological soil crusts (BSCs), which modify numerous physicochemical surface properties involved in runoff and erosion processes. BSCs are considered as one of the most important stabilizing factors in the soil surface, but most previous research has concentrated only on patch or hillslope-scale effects of BSCs, and their effect at coarser scales has rarely been studied. In this article, we present a new approach based on previous surface cover quantification for including the effects of BSCs in physically-based runoff and erosion modeling. The Limburg Soil Erosion Model (LISEM) was used to parameterize and simulate the effects of BSCs on runoff and erosion in a small semiarid catchment characterized by fine-textured soils and predominantly covered by BSCs. Paired model simulations under two scenarios, with and without including the effects of BSCs, were run under different rainfall intensities to evaluate the effect of BSCs on runoff and erosion under different rainfall conditions. Runoff and erosion rates recorded in the field at the catchment outlet were predicted much more accurately when BSCs were included because there was less overestimation of runoff rate, maximum runoff peaks and erosion rates in the areas dominated by BSCs. The proposed approach enables BSCs to be included in spatially distributed runoff and erosion models, improving their predictions, and may be used for evaluating how the effect of human activity on BSCs affects catchment-scale water erosion.