Urbanization is one of the most important factors that affect flood risk. Flood risk is, thus, expected to increase in the future with further urbanization in various parts of the world. In order to overcome flood risk, appropriate measures need to be taken based on a deep understanding of the risk levels under various urban extents as such studies are essential to formulate effective measures. In this study, the dynamic cellular automata-based urbanization model called SLEUTH was used to model urbanization in Ayamama Watershed, a watershed located in Istanbul, Turkey, under three landuse policy scenarios: current trend, east-west-oriented growth trend and growth trend under Project Canal Istanbul (PCIT). The outputs of the urbanization modeling, together with hydrographs of various return periods determined using the Peak-Over-Threshold value method and other required inputs, were used to investigate the effects of urbanization on flood risk using the hydrodynamic two-dimensional flexible mesh model, known as MIKE 21 FM. The results of the study showed that allowing unrestricted urbanization (dense development under PCIT scenario) in Ayamama Watershed will lead to considerable increase in the size of land inundated by flood when compared to the other scenarios. Thus, not allowing further development in the watershed is the best alternative. However, if the implementation of the PCIT scenario is inevitable, limiting the level of development in such a way that it does not result in considerable change in the flood risk is recommended. In addition, improving the drainage system in the watershed could further reduce the flooding risk.