Environmental degradation due to the rapid growth of urban sprawl to eco-sensitive areas emphasizes the need of future projection of urban settlement in eco-sensitive areas. As a promising step towards the eco-friendly urban development, this paper projects the urban settlement in hills of Guwahati city by using a well-validated urban settlement assessment model of the study area. Future values of the socio-economic, demographic and geographical parameters incorporated in the model have been determined with reference to the “Master Plan for Guwahati Metropolitan Area-2025”. As per this model projection, by 2025, average 25.45% of the hilly area of Guwahati city is going to have an unplanned urban settlement, whereas, in 2011, it was only 14.33%. Future landuse land cover change data of the hills have been generated by spatially distributing the projected urban settlement depending on the grid-wise elevation in hills. This type of projection, done on the basis of future socio-economic and demographic condition derived from the master plan of a city can be used for environmental impact assessment of the plan. Finally, by using Rational Method, the impact of the future urban settlement on peak run-off generation has been evaluated for a watershed in the Fatasil hill of Guwahati city. The hydrological study has shown an alarming result with a 20.75% increase in peak run-off due to the conversion of additional 14.5% of the watershed area to urban settlement.