Rangelands provide a diverse array of vital services that pertain to human life. But market failure to consider the value of these ecosystem services has disturbed provision of many ecosystem services. In this study the economic value of water conservation functions by Arnaveh basin located in northwestern Iran was estimated. Rainfall-runoff simulation was carried out by using Curve Number (CN) method. Also by means of Replacement Cost method the value of the hydrological services were quantified. The role of vegetation cover in water conservation was estimated by comparing the surface runoff under current condition and uncovered soil conditions. Moreover the role of rangelands on water retention and surface runoff reduction by devising three more hypothetical scenarios and then the effects of land use changes associated with these scenarios on rainfall-runoff rate of the region were compared. Results showed that the role of rangelands vegetation cover in water conservation and surface runoff reduction was 7.19×106 m3, with the economic value of 123×109 IRR. Also, the results of a comparing between 3 hypothetical scenarios and current conditions showed that, under the case of scenario one which assumes that the entire of rangelands area is becoming to rain-fed farming, total outflow would be in the maximum amount and the most negative effects will accrue. Also the scenarios of improvement of vegetation cover to 25-50 percent has the most positive effects (1.95×106 m3 yr-1 decrease) on water retention. The results of this study could help decision-makers in selecting appropriate and economically feasible development strategies.