Small reservoirs play an important role in providing water to rural communities. Increased construction of small reservoirs to mitigate the effects of droughts leads to a High-density Reservoirs Network (HdRN) of small reservoirs, which can potentially modify the streamflows both in dry and wet periods. However, there is a lack of understanding of the interannual behavior of flow retention and the impact of future increases in the number of small reservoirs, mainly for HdRN in dryland catchments. This research aims to determine the possible impact of the increase in the number of small reservoirs on dry hydrological networks, evaluating the annual flows generated at the outlet of a dryland watershed for scenarios with different densities of small reservoirs (number of reservoirs per area). The study area was the Conceição river catchment (3347 km2) in the semiarid of Brazil. The hydrological model of the study area was developed in SWAT. The model obtained appropriate results for daily streamflows, with values of 0.63, 0.81, and 0.53% for NSE, KGE, and PBIAS, respectively. The current density of small reservoirs in the region was estimated at 0.068 reservoirs per square kilometer (res/km2). Eight expansion scenarios were defined for densities between 0.1 res/km2 and 3.0 res/km2. The results showed that the influence of the HdRN on runoff reduction mostly occurs for a probability of exceedance between 1% and 10% of month flows and is very small for months with very high peaks of flow. The reduction in the outlet flow due to the increase in the number of small reservoirs was stronger during dry years (up to 30%) than during wet years (up to 8%), and it tended to increase in years with a consecutive lack of rain (from about 7% in the first year to about 20% in the last year and in the worst scenario), which may intensify the period of extended droughts. This research provides insights about the impact of the increase in the number of small reservoirs on the interannual variability of flow retention, and the understanding of the influence of small reservoirs on runoff reduction may help water resources agencies better prepare for hydrologic extremes (droughts and floods).