Federal condemnation of tribal lands to be flooded for the project displaced more than 600 Seneca members and cost the reservation 10,000 acres (4,000 ha), nearly one-third of its territory and much of its fertile farmland.

The proposed flooding of lands behind the dam to create a lake for recreation and hydropower would make them lose most of the historic Cornplanter Tract in Pennsylvania as well as numerous communities and thousands of acres of fertile farmland in New York.

According to the Corps of Engineers, side benefits derived from the dam would include drought control, hydroelectric power production, and recreation.

According to the US Army Corps of Engineers, Kinzua more than paid for itself in 1972 when tropical storm Agnes dumped continual heavy rains on the watershed, bringing the reservoir to within three feet of its maximum storage capacity.

It uses base load electricity, then reclaims that energy when needed by allowing the water to fall back down and drive generators along the way.

[3] Construction of the dam condemned 10,000 acres (4,000 ha) of the Allegany Reservation, nearly one third of its territory, which had been granted to the Seneca nation in the Treaty of Canandaigua, signed by President Washington.

In 1961, citing the immediate need for flood control, President John F. Kennedy denied a request by the Seneca to halt construction.

Until the mid-20th century, numerous Seneca tribe members, particularly those in the floodplain, had lived simply according to traditional ways, with no modern conveniences such as electricity.

Two townships, Kinzua in Pennsylvania and Elko (Quaker Bridge) in New York, dissolved their incorporations, while the Warren County portion of Corydon was likewise subsumed.

Others, such as the McKean County portion of Corydon, Pennsylvania and Onoville, New York, retained their government but lost much of their population when the cores of their communities were flooded.

Although it was not directly flooded, the dam's first stress test in 1967 submerged New York State Route 17 west of Red House, and a new highway, the Southern Tier Expressway, would have to be constructed.

[17] In preparation for the eviction, the Onoville, Quaker Bridge, and Red House post offices were closed in summer 1964, and as a result, the ZIP codes for those towns were never officially used.

The dam project also forced the displacement of Camp Olmsted, owned by the Chief Cornplanter Council of the Boy Scouts of America.

The song "As Long as the Grass Shall Grow", written by Peter La Farge and recorded by Johnny Cash as the first track of his 1964 album Bitter Tears: Ballads of the American Indian, relates the loss of Seneca Nation land in Pennsylvania due to the construction of the Kinzua Dam.

[21] In 2014, filmmakers Paul Lamont and Scott Sackett began production of a documentary for PBS titled Lake of Betrayal, concerning the construction of Kinzua Dam and creation of Allegheny Reservoir.