Studies have found that the dominant source of sediment in streams can be from bank erosion. Subsurface flow contributes directly to bank failure by seepage erosion and soil-pipe erosion and indirectly by the impact of increased soil water pressures on loss of soil shear strength.. Seepage erosion involves sediment transport out of a gully face by liquefaction of soil particles entrained in the seepage. The undercutting of the gully face by seepage erosion results in bank failure which may be a contributing factor to headcut migration and gully widening. This paper will review recent work on seepage erosion involving field measurements, laboratory experiments and numerical modeling of the seepage erosion process. Stability modeling integrated with variably-saturated flow modeling indicated that the mean factor of safety was exponentially related to the degree of undercutting. These results show that mass wasting of gully banks can be the result of seepage erosion undercutting gully walls. This process was shown to be of equal or greater importance than the impact of seepage on soil strength properties. The question remains as to what role this process plays in ephemeral gully erosion. It is common to observe ephemeral gullies formed on duplex soils, i.e. an erodible surface layer over a water restrictive layer, which are naturally conducive to seepage erosion processes.