Climatic models predict a reduction in summer rainfall and increased temperatures in southwestern British Columbia and as a consequence, lower summer flows in headwater streams could potentially affect structural and functional aspects of these ecosystems. To evaluate these potential effects, we studied alder (Alnus rubra Bong.) leaf litter decomposition rates and associated macroinvertebrates in 4 similar headwater streams. During summer, two of these streams dried to the point of no observable surface water and two maintained flow at the surface during the experiment. In one stream, we diverted water around one reach using weirs and pipes, reducing the normal discharge. We placed alder leaf bags in multiple reaches in each stream, both in pools and riffles, and collected them after 21, 44 and 63 days. Decomposition rates were 2-3 times faster in reaches with water than in dried channels. After 63 days, decomposition in diverted reach riffles was 40% less than in unmanipulated reaches. Density of total macroinvertebrates and shredders associated with bags was two-fold higher in riffles than in pools, except in the diverted reach, where it was similar between habitats. These results suggest an impact of flow reduction towards lower rates of organic matter processing in streams.