This paper describes an analysis of natural and anthropogenic factors controlling the evolution of gullies in a rural basin in the basaltic upland in the State of Rio Grande do Sul, Southern Brazil. In this region of deep ferrallitic soils with more than 60% clay, runoff and erosion are of increasing concern. In the Tabo(a)o drainage basin (100 km2), gully erosion was studied in a field survey that measured rills and gullies. Eighty-four gullies were identified. They had an average length of 136 m, were 10 m wide, and 3 m deep and had a volume of 15.458 m3. Each gully was characterised in terms of factors that included slope, geological structure, presence of piping, drainage, soil use, and the presence of surface and subsurface flow. On average, the main channels had knickpoints varying from 2 m to 7 m, and their evolution in the vertical plane increased until bed-rock basalt material was reached, after which gullies increase in width and length. Gully development was also monitored from 1991 to 2003. Subsurface flow appears to be the principal agent controlling their development. Results show that both natural (slope, surface curvature, geological structure and rainfall) and anthropogenic (soil use, road construction) factors are important in gully development. The change in cultural practices throughout the drainage basin from conventional to direct seeding has led to increased subsurface flow, which was more important than surface runoff in causing erosion. However, the higher rainfall during El Ni(n)o Southern Oscillation (ENSO) events and the consequently higher subsurface flow were the dominant factors. From 1991 to 2003 a total land loss of 1,013 m3 was observed in one gully, with 236 m3 lost during the 1992 ENSO and 702 m3 during the 1997 ENSO; 95% of the total volume lost occurred during ENSO periods.