Gully erosion seriously threatens farmland and causes soil loss. Estimating sediment transport in a gully system is important for understanding the mechanisms of gully erosion. The morphological method successfully applied in estimating bed-material transport in rivers, for some decades, has yet to be applied to gully erosion. Here, we estimate sediment transport in a gully system using the morphological method. It was applied to a laboratory simulation of a loess catchment. Nine high-resolution Digital Elevation Models (DEMs) were acquired by digital close-range photogrammetry and used to determine morphological change. Mass conservation was used to explain measured morphological change, and to infer the changes in sediment transport in space. The results showed that gully erosion is greater than deposition in the initial stages of gully development. Serious gully erosion occurs in the gully heads or upstream areas, and the erosion and deposition become balance in the downstream area. A large proportion of the total transport was actually concentrated into one main channel. Meanwhile, the active areas (high transport) of sediment transport gradually developed from the downstream to upstream with the gully development.