Airborne Lidar Bathymetry (ALB) provides a rapid means of data collection that provides seamless digital elevation maps across land and water. However, environmental factors such as water surface induce significant uncertainty in the ALB measurements. In this study, the effect of water surface on the ALB measurements is characterized both theoretically and empirically. Theoretical analysis includes Monte Carlo ray-tracing simulations that evaluate different environmental and hardware conditions such as wind speed, laser beam footprint diameter and off-nadir angle that are typically observed in ALB survey conditions. The empirical study includes development of an optical detector array to measure and analyze the refraction angle of the laser beam under a variety of environmental and hardware conditions. The results suggest that the refraction angle deviations ( $2\mathsf{\sigma }$ ) in the along-wind direction vary between 3–5° when variations in wind speed, laser beam footprint size and the laser beam incidence angle are taken into account.