A very high resolution (VHR) digital elevation model (DEM) is produced from a GeoEye-1 0.5-m-resolution satellite stereo pair and is used for floodplain management and mapping applications such as watershed delineation and river cross-section extraction. For this purpose, a 2 m × 2 m resolution terrain surface is produced from the stereo pair by using the Leica Photogrammetry Suite (LPS) enhanced Automatic Terrain Extraction (eATE) algorithm. DEM accuracy is assessed by comparison with measured individual ground control points (GCPs), stream cross-sections and other landscape features. Results show that the produced DEM is in good agreement with ground truth and superior to products of lower resolution, such as 90 m NASA Shuttle Radar Topography Mission (SRTM) and 1:5,000 topographical maps. One- and two-dimensional hydraulic models are used to simulate rainfall–runoff characteristics and flood wave kinematics of the flash flood event of 17 October 2006 that occurred in the ungauged basin of Almirida, using the 2 m VHR-DEM as an input. Results show that the hydraulic simulation based on the generated VHR-DEM, calibrated and validated via field data, produces an accurate extent and water level of the flooded area. Remote sensing stereo reconstruction is a promising alternative to traditional survey methods in flood mapping applications.