Development has been shown to alter the physical, chemical, and biological characteristics of water bodies, leading to degraded water quality. Maintaining water quality while allowing for growth presents a major challenge for communities. The Lake Waukewan watershed encompasses five towns in the rapidly-growing Lakes Region of New Hampshire, and the lake is the public drinking water supply for the Town of Meredith. Over the past decade, water quality has declined as population has increased, and watershed towns responded by creating a watershed management plan. To establish baseline water quality data for the watershed and to identify potential areas in the watershed that posed threats to lake water quality, we analyzed physical habitat andwater chemistryat12 tributary sites, and physical habitat and macroinvertebrate community composition at six tributary sites. Water quality was generally good throughout the watershed, indicated by intact riparian zones, the predominance of forest cover, and average diversity for first-and second-order streams. Several subwatersheds, particularly those near the urbanized portion of Meredith, as well as southern New Hampton and Center Harbor, showed elevated conductance levels; higher than optimal phosphorus concentrations were found in scattered subwatersheds. Generally, chemical variables indicated declining water quality with increasing imperviousness; biological and habitat variables improved as impervious increased, in contrast to prior research. However, signs of biological stress were observed, including lower than expected abundance of sensitive taxa, dominance by oligochaetes and tolerant chironomids, and an imbalance in functional feeding groups. We believe that the small sampling size, the small range of impervious cover in the watershed, and the small size of the sampled streams may have masked the actual effects of imperviousness on habitat and diversity. Local riparian land use contributed more to instream habitat conditions than whole-watershed land use did; while whole-watershed land use patterns better determined water chemistry in streams. High priority should be placed on the Lower Reservoir, Upper Reservoir, Saywood Brook, Pollard Shores, Golf Course Drainage, and Monkey Pond sites.