Erosion and infrastructure in the Arctic can change the thickness of the active layer which can subsequently alternate the thermal-hydrological regime and change the drainage patterns on slopes. Previous studies have shown that drainage can either decrease due to the movement of water occurring in deeper soil layers with lower permeability or increase due to the formation of features like gullies and channels. In a field experiment conducted in Qaanaaq, Greenland, the surface topography was altered by adding 35 cm soil in one treatment, removing 33 cm in another, while an untreated plot measuring 10 × 10 m was maintained for comparison purposes. The temperature and water content of these plots were monitored in the three following years. Based on field measurements, a 1-dimensional model was set up in CoupModel to simulate the field experiment and quantify changes in the thickness of the saturated zone and drainage as a consequence of the treatment. Both field observations and simulations show that the addition and removal of soil changed the thickness of the saturated layer in the active layer, which changed the thermal properties in the soil and, thus, the response of thawing or recovery of permafrost. The simulations showed that during the summer depressions there were higher water contents, which accelerated warming of the soil and increased permafrost thawing of 35.7 cm in depth. In contrast, raising the soil surface aggregated only 19.8 cm of permafrost due to higher buffering from lower water contents. Changed active layer thickness altered the thickness of the saturated zone, leading to changed drainage patterns: In depressions, first drainage occurs three days earlier, and maximum daily drainage is increased by 154% as compared to ambient conditions. In contrast, raising the surface delayed the runoff from the plot by up to eight days, and decreased the maximum daily drainage to 72%. Effects of the treatment were most pronounced during the first year after the experiment, with diminishing effects during the consecutive year as the system equilibrated to the new state. Results from our study can advance our understanding of impacts of both natural and human-induced surface alterations on active layer thickening and water movement in permafrost-affected areas, which ultimately affect the entire ecosystem and the living conditions for local communities.