Geologic evidence suggests that the Martian surface and atmospheric conditions underwent major changes in the late Noachian, with a decline in observable water-related surface features, suggestive of a transition to a dryer and colder climate. Based on that assumption, we have modeled the consequences of impacts into a ∼2–6 km-thick cryosphere. We calculate that medium-sized (few 10 s of km diameter) impact craters can physically and/or thermally penetrate through this cryosphere, creating liquid water through the melting of subsurface ice in an otherwise dry and frozen environment. The interaction of liquid water with the target rock produces alteration phases that thermochemical modeling predicts will include hydrous silicates (e.g., nontronite, chlorite, serpentine). Thus, even small impact craters are environments that combine liquid water and the presence of alteration minerals that make them potential sites for life to proliferate. Expanding on the well-known effects of large impact craters on target sites, we conclude that craters as small as ∼5–20 km (depending on latitude) excavate large volumes of material from the subsurface while delivering sufficient heat to create liquid water (through the melting of ground ice) and drive hydrothermal activity. This connection between the surface and subsurface made by the formation of these small, and thus more frequent, impact craters may also represent the most favorable sites to test the hypothesis of life on early Mars.