Models of the effects of atmospheric N deposition in forested watersheds have not adequately accounted for the effects of aquatic and near-stream processes on the concentrations and loads of NO3/- in surface waters. This study compared the relative effects of aquatic and near-stream processes with those from the terrestrial ecosystem on the retention and transport of NO3/- in two contrasting stream reaches of the Neversink River, a forested watershed in the Catskill Mountains of New York that receives among the highest load of atmospheric N deposition in the northeastern United States. Stream water samples were collected every two hours and ground-water and tributary samples were collected daily at base flow conditions during four 48-hour periods from April to October 1992, and NO3/- mass balances were calculated for each site. Results indicated diurnal variations in stream NO3/- concentrations in both reaches during all four sampling periods; this is consistent with uptake of NO3/- by photoautotrophs during daylight hours. Mass-balance results revealed significant stream reach losses of NO3/- at both sites during all sampling periods. The diurnal variations in NO3/- concentrations and the retention of NO3/- relative to terrestrial contributions to the stream reaches were greater downstream than upstream because physical factors such as the head gradients of inflowing ground water and the organic matter content of sediment are more favorable to uptake and denitrification downstream. The mass retention of NO3/- increased as the mean 48-hr stream discharge increased at each site, indicating that the responsible processes are dependent on NO3/- supply. Low stream temperatures during the April sampling period, however, probably reduced the rate of retention processes, resulting in smaller losses of NO3/- than predicted from stream discharge alone. Water samples collected from the stream, the hyporheic zone, and the alluvial ground water at sites in both reaches indicated that the net effect of hyporheic processes on downstream NO3/- transport ranged from conservative mixing to complete removal by denitrification. The relative effects of biological uptake and denitrification as retention mechanisms could not be quantified, but the results indicate that both processes are significant. These results generally confirm that aquatic and near-stream processes cause significant losses of NO3/- in the Neversink River, and that the losses by these processes at downstream locations can exceed the NO3/- contributions to the stream from the terrestrial environment during summer and fall base-flow conditions. Failure to consider these aquatic and near-stream processes in models of watershed response to atmospheric N deposition could result in underestimates of the amount of NO3/- leaching from forested ecosystems and to an inability to unequivocally relate geographic differences in NO3/- concentrations of stream waters to corresponding differences in terrestrial processes.