The pulse density of airborne Light Detection and Ranging (LiDAR) is increasing due to technical developments. The trade-offs between pulse density, inventory costs, and forest attribute measurement accuracy are extensively studied, but the possibilities of high-density airborne LiDAR in stream extraction and soil wetness mapping are unknown. This study aimed to refine the best practices for generating a hydrologically conditioned digital elevation model (DEM) from an airborne LiDAR -derived 3D point cloud. Depressionless DEMs were processed using a stepwise breaching-filling method, and the performance of overland flow routing was studied in relation to a pulse density, an interpolation method, and a raster cell size. The study area was situated on a densely ditched forestry site in Parkano municipality, for which LiDAR data with a pulse density of 5 m–2 were available. Stream networks and a topographic wetness index (TWI) were derived from altogether 12 DEM versions. The topological database of Finland was used as a ground reference in comparison, in addition to 40 selected main flow routes within the catchment. The results show improved performance of overland flow modeling due to increased data density. In addition, commonly used triangulated irregular networks were clearly outperformed by universal kriging and inverse-distance weighting in DEM interpolation. However, the TWI proved to be more sensitive to pulse density than an interpolation method. Improved overland flow routing contributes to enhanced forest resource planning at detailed spatial scales.