Crop yield patterns at the field level in dryland agricultural systems often trace back to the spatial structure of water storage and subsurface flow paths. These lateral flow paths create zones of saturation that promote nutrient loss from runoff and leaching beneath the root zone. Despite its clear importance, a spatially explicit representation of landscape hydrology is frequently missing from site-specific crop and fertilizer management plans. This work uses the grid-based water balance model, SMR (soil moisture routing), to adapt an established method of hydrologic classification, the Budyko framework, for small agricultural watersheds. The model was evaluated with spatially distributed soil moisture data and surface runoff measurements in four annually cropped fields located across the eastern Palouse region of the inland Pacific Northwest. The Budyko framework, modified to include change in root zone water storage and lateral flow, was combined with a separate indicator of yield potential to form a dual-threshold classification scheme for variable-rate fertilizer management that balances agronomic benefit with environmental impact. Each field was divided into zones based on crop yield and nitrogen loss potentials, which link to the hydrologic functioning of the landscape through soil water storage and subsurface redistribution, respectively. Results showed large variability in the annual water balance assessed within individual fields and between fields. The greatest variability was observed in the two eastern-most fields where the wettest zone of each had water supply 172% and 137% that of the dry zone. Depth to a hydraulic restrictive layer and topography were identified as primary landscape controls on the water supply (precipitation plus net lateral flow minus change in water storage) in these fields. Moreover, the steep climate gradient in the region created field-to-field variability in water balance with the ratio of evapotranspiration to precipitation ranging from 91% in the western-most field to approximately 70% in each of the fields to the east. The clearest choice is for growers to apply more fertilizer in areas with high water storage capacity and high crop yield and where fertilizer loss through leaching and runoff is minimal. Less fertilizer should be applied in areas with low water storage capacity that frequently saturate. Areas with high storage capacity and frequent saturation involve a tradeoff between yields and minimizing fertilizer loss that may be best served by splitting fertilizer application to avoid excessive over-winter leaching losses. Even though remote sensing and variable-rate applicators are at the frontiers of precision agriculture, landscape hydrology underlies all dryland crop production and should accordingly be looked to for inspiration in the design of cropping systems.