Abstract: We studied benthic macroinvertebrate communities in 12 mid‐elevation mountain streams in the Sierra Nevada, California. Data were collected at nine times (seven springs and two autumns) over a 14‐year period of variable hydrological conditions, including years of flood and extreme unprecedented drought. The taxonomic and trait structures of communities were similar during wet and average springs but became increasingly different as drought continued and smaller streams became intermittent. The density of total invertebrates, primarily chironomids, increased during the drought years, but the richness and abundance of mayfly, stonefly, and caddisfly (EPT) taxa declined during the late drought. During the late drought, the proportions of rheophilic, semivoltine taxa with clinger or swimmer behavioural habits decreased, whereas small, stress‐tolerant taxa with burrower and climber habits increased. Collector–gatherers dominated in all periods, but during the severe drought the relative abundance of micropredators increased and filterers, shredders, and grazers decreased. We also found greater changes in community structure between spring runoff and autumn base flow conditions in an average than a wet year. However, spring to autumn population growth rates were much greater during the wet than average year. Invertebrate richness and EPT abundance decreased and community structure showed large changes when stream discharge fell below 1–10 L/s, but remained relatively constant across a range of higher flows. During the severe drought, there were significant declines in the densities of 40% of the common EPT taxa compared to average and wet years, but chironomid, mite, and other invertebrate taxa showed variable responses. Invertebrate diversity, community structure, and ecosystem functions in small, headwater streams are especially vulnerable to drought conditions, which are expected to increase in frequency and intensity with climate change in the Sierra Nevada and other mountainous regions.