Rangeland conditions in the Lesotho highland dam catchment areas is important for local livelihoods and regional water supply. We investigated changes in land cover and condition from 1991 (before construction) to 2013, using Landsat imagery. The Normalised Difference Vegetation Index (NDVI) decreased in the catchment areas, while increasing within two protected areas. NDVI decreases were greatest close to the dams and in the high altitude summer grazing areas. Land cover maps were generated for 1993, 2005 and 2013, using structural vegetation classes, as well as categories of grassland based on NDVI. High altitude areas were characterised by grasslands changing to lower NDVI categories, indicating overgrazing in climax sourveld grasslands. Mid-altitude areas were characterised by grasslands changing to higher NDVI categories and increases in woody vegetation, indicating overgrazing in Sweetveld. At lower altitudes, the increase in cultivated areas suggested disproportionately high population growth in the catchment areas. The results suggest that there has been widespread degradation that appears to be more as a result of overgrazing than climate change. The study demonstrates the importance of using a combination of land cover, NDVI and field data in assessing degradation. Natural capital accounting methods provide a useful framework for documenting, monitoring and understanding changes in ecosystem condition.