Conventional tillage may impose changes in soil physical properties that lead to a decrease in soil physical quality. Although plough pan formation is considered to be an important consequence of conventional tillage practices in Southeastern Brazil, few studies have focused on its hydrological consequences. Detailed investigations in two experimental plots located in the hilly landscape of Serra do Mar close to Rio de Janeiro city were carried out to characterize the changes in soil physical properties and in soil hydrology due to plough pan formation. Conventional (CT) and minimum tillage (MT) practices were implemented in two plots for 3 years and soil matric potential (SMP) was monitored in each plot via nests of tensiometers and Watermark® sensors installed at different depths. Undisturbed soil blocks were collected for micromorphological analyses to quantify the total pore space in soils under CT and MT systems, and in soils under natural tropical forest. Results suggest that soils under the CT system developed a plough pan layer at about 20 cm depth that had 44% less total porosity as compared to surface conditions. It is shown that soils under the CT system tended to stay saturated for longer periods of time after each rainfall event. Besides, during intense rainy periods soils under the CT system may develop hydrologic conditions that favor lateral flows while soils under the MT system were still draining. Such hydrological responses may explain why average soil erosion rates measured for individual rainfall events under the CT system were about 2.5 times greater than the ones observed at MT. The results attested that conventional tillage in this area generated modifications in soil fabric, especially in pore-size distribution and connectivity, which induced important changes in soil hydrology and soil erosion. The agricultural practices used in this area, associated with the local steep hillslopes and intense rainfall events, are definitely not adequate and require the introduction of soil and water conservation practices in order to become sustainable.