The spatial scale mismatch between runoff generation and runoff routing is an acceptable compromise but a common issue in hydrological modeling. Moreover, there is hardly any report available on whether a unit hydrograph (UH) that is consistent with the spatial scale of runoff generation can be computed. The objective of this study was to explore the influence of spatial heterogeneity of runoff generation on the UH for flood prediction. To this end, a novel GIS-based dynamic time-varying unit hydrograph (DTDUH) was proposed based on the time-varying unit hydrograph (TDUH). The DTDUH can be defined as a typical hydrograph of direct runoff which gets generated from one centimeter of effective rainfall falling at a uniform rate over the saturated drainage basin uniformly during a specific duration. The DTDUH was computed based on the saturated areas of the watershed instead of the global watershed. The saturated areas were extracted based on the TWI. Finally, the Longhu River basin and Dongshi River basin were selected as two case studies. Results showed that the proposed method exhibited consistent or better performance compared with that of the linear reservoir routing method, and performed better than the TDUH method. The proposed method can be used for watersheds with sparse gauging stations and limited observed rainfall and runoff data, as for the TDUH method. Simultaneously, it is well applicable to humid or mountain watersheds where saturation-excess rainfall is dominant.