This paper introduces the Cheonggye-cheon restoration project. The restoration project aims to revive the 600-year-old city of Seoul by recovering the historical heritage, guaranteeing safety from the deteriorated covering structures, creating the environment-friendly space, and revitalizing the neglected city centers. In order to understand the current hydrological cycle of the Chenggye-cheon watershed, the annual water balance of the region was calculated using the observed data including precipitation, runoff, water supply and sewage, and the changes in the groundwater level. The $2001{sim}2002$ data were used to calibrate the WEP, and the $2003{sim}2004$ data were used to verify the WEP. The calibration and validation results for the flood hydrograph how a reasonable value (at Majanggyo station, the R2 for the calibration period was 0.9, and that for the validation period was 0.7). According to the annual water balance of the Cheonggye-cheon watershed for 2004, the amount of surface runoff, infiltration, and evapotranspiration was 1,097mm, 216mm and 382mm, respectively, for an annual precipitation of 1,499mm. The application results from WEP, a distributed hydrological model, provide more detailed information of the watershed, and the model will be useful for improving the hydrological cycle in urban watershed.