A numerical groundwater-flow model was used to characterize the source area and volume of Phillips Branch, a baseflow-dominated stream incising a highly permeable unconfined aquifer on the low relief Delmarva Peninsula, USA. Particle-tracking analyses indicate that the source area (5.51 km²) is ~20% smaller than the topographically defined watershed (6.85 km²), and recharge entering ~37% of the surface watershed does not discharge to Phillips Branch. Groundwater residence time within the source volume ranges from a few days to almost 100 years, with 95% of the volume "flushing" within 50 years. Artificial discharge from groundwater pumping alters the shape of the source area and reduces baseflow due to the interception of stream flow paths, but has limited impacts on the residence time of groundwater discharged as baseflow. In contrast, artificial recharge from land-based wastewater disposal substantially reduces the source area, lowers the range in residence time due to the elimination of older flow paths to the stream, and leads to increased discharge to adjacent surface-water bodies. This research suggests that, in this and similar hydrogeologic settings, the "watershed" approach to water-resource management may be limited, particularly where anthropogenic stresses alter the transport of soluble contaminants through highly permeable unconfined aquifers.