Urbanization results in major changes to stream morphology and hydrology with the latter often cited as a primary stressor of urban stream ecosystems. These modifications unequivocally alter stream hydraulics, but little is known about such impacts. Hydraulic changes due to urbanization were demonstrated using two-dimensional hydrodynamic model simulations, comparing urban and non-urban stream reaches. We investigated three ecologically relevant hydraulic characteristics: bed mobilization, retentive habitat, and floodplain inundation, using hydraulic metrics bed shear stress, shallow slow-water habitat (SSWH) area, and floodplain inundation area. We hypothesized that urbanization would substantially increase bed mobilization, decrease retentive habitat, and due to increased channel size would decrease floodplain inundation. Relative percent area of bed disturbance was 4 times higher, compared with that of the non-urban stream at bankfull discharge. SSWH availability rapidly diminished in the urban stream as discharge increased, with SSWH area and patch size 2 times smaller than the non-urban stream for a frequently occurring flow 0.7 times bankfull discharge. Floodplain inundation decreased in frequency and duration. These results demonstrate changes in hydraulics due to urbanization that may impact on physical habitat in streams. New “water sensitive” approaches to stormwater management could be enhanced by specification of hydraulic regimes capable of supporting healthy stream habitats. We propose that a complete management approach should include the goals of restoration and protection of natural hydraulic processes, particularly those that support ecological and geomorphic functioning of streams.