Most models for reservoir operation optimization have employed either deterministic optimization or stochastic dynamic programming algorithms. This paper develops sampling stochastic dynamic programming (SSDP), a technique that captures the complex temporal and spatial structure of the streamflow process by using a large number of sample streamflow sequences. The best inflow forecast can be included as a hydrologic state variable to improve the reservoir operating policy. A case study using the hydroelectric system on the North Fork of the Feather River in California illustrates the SSDP approach and its performance.