We used two-dimensional hydrodynamic models for the assessment of water diversion effects on benthic macroinvertebrates and associated habitat in a montane stream in Yosemite National Park, Sierra Nevada Mountains, CA, USA. We sampled the macroinvertebrate assemblage via Surber sampling, recorded detailed measurements of bed topography and flow, and coupled a two-dimensional hydrodynamic model with macroinvertebrate indicators to assess habitat across a range of low flows in 2010 and representative past years. We also made zero flow approximations to assess response of fauna to extreme conditions. The fauna of this montane reach had a higher percentage of Ephemeroptera, Plecoptera, and Trichoptera (%EPT) than might be expected given the relatively low faunal diversity of the study reach. The modeled responses of wetted area and area-weighted macroinvertebrate metrics to decreasing discharge indicated precipitous declines in metrics as flows approached zero. Changes in area-weighted metrics closely approximated patterns observed for wetted area, i.e., area-weighted invertebrate metrics contributed relatively little additional information above that yielded by wetted area alone. Loss of habitat area in this montane stream appears to be a greater threat than reductions in velocity and depth or changes in substrate, and the modeled patterns observed across years support this conclusion. Our models suggest that step function losses of wetted area may begin when discharge in the Merced falls to 0.02 m3/s; proportionally reducing diversions when this threshold is reached will likely reduce impacts in low flow years.