To quantify the movement of atmospheric nitrogen deposition through two forested watersheds in the Catskill Mountains of New York, dual‐isotope analysis (δ¹⁵N and δ¹⁸O) was used to differentiate NO₃⁻ derived from precipitation from NO₃⁻ derived by microbial nitrification and to quantify the contributions of these sources to NO₃⁻ in drainage waters. Samples of stream water, soil water, precipitation, snowmelt, and O‐horizon soil were collected during the March and April snowmelt period of 1994 and throughout an 18‐month period from August 1995 through February 1997. The mean δ¹⁸O‐NO₃⁻ value of precipitation was +50.5‰, whereas the mean values for stream water and soil water were +17.7‰ and +23.6‰, respectively. The mean δ¹⁵N‐NO₃⁻ of precipitation was −0.2‰, that of soil water was +1.4‰, and that of stream water was +2.3‰; these values showed greater overlap among the three different waters than did the δ¹⁸O‐NO₃⁻ values, indicating that δ¹⁵N‐NO₃⁻ was not as useful for source separation. Soil water δ¹⁸O‐NO₃⁻ values decreased, and δ¹⁵N‐NO₃⁻ values increased, from the O to the B and C horizons, but most of the differences among horizons were not statistically significant. Nitrate derived by nitrification in incubated soil samples had a wide range of δ¹⁵N‐NO₃⁻ values, from +1.5‰ to +16.1‰, whereas δ¹⁸O‐NO₃⁻ values ranged more narrowly, from +13.2‰ to +16.0‰. Values of δ¹⁸O‐NO₃⁻ indicated that NO₃⁻ in stream water is mainly derived from nitrification. Only during a high‐flow event that exceeded the annual flood was precipitation a major contributor to stream water NO₃⁻. Values of δ¹⁸O‐NO₃⁻ and δ¹⁵N‐NO₃⁻ changed at differing rates as NO₃⁻ cycled through these watersheds because δ¹⁸O‐NO₃⁻ values change sharply through the incorporation of oxygen from ambient water and gas during nitrification, whereas δ¹⁵N‐NO₃⁻ values change only incrementally through fractionation during biocycling processes. The results of this study show that most NO₃⁻ is first cycled through the biota and nitrified before entering the stream.