Methods: The impact of soil erosion by mass movement on forest productivity was investigated in a paired plot trial in a planted forest in a mainly hilly to steepland catchment (Pakuratahi) near Napier, eastern North Island, New Zealand. Tree growth and form were measured and soil properties analysed to compare productivity and productivity drivers in adjacent non-eroded and eroded plots. Background: The effect of soil erosion on New Zealand production forestry is not well known and there has been no research prior to our study into the relationship between soil nutrient status and planted forests growing in eroded soils in steeplands. Results: Regression analysis showed that the decreased soil total nitrogen, total carbon, total phosphorus, and soil organic matter content in eroded plots had a negative impact on tree volume, resulting in a 10% decrease in measured tree volume. Based on an assessment of log quality, trees in the eroded plots were forecast to produce 16% less volume from high-quality pruned logs (with associated reduction in revenue of around $4000 per hectare), than trees in non-eroded plots. The total recoverable volume (TRV), estimated (for a 25-year rotation) from the measured Pinus radiata D. Don trees growing on the eroded sites, was valued at $68,500, about 9% less than the estimated TRV from trees measured on non-eroded plots ($76,000). Tree form and mean tree height in eroded and non-eroded plots were not significantly different. Conclusions: Soil erosion impacts production in planted forests. Afforestation of erodible land provides a valuable ecosystem service through land and soil stabilisation but this service is currently not reflected in the market prices for timber in New Zealand. Maintaining the productive capacity of erodible soils through practices such as fertilisation or continuous-cover forestry can add further costs to production forestry. To ensure that sustainable forest practices are carried out to protect the productivity of soils, financial incentives may be justified.