Hawaii's extreme isolation has resulted in a native stream fauna characterized by high endemism and unusual life history characteristics. With the rapid increase in the human population, the viability of Hawaiian stream ecosystems is threatened by development and the associated habitat alteration. Thirty-eight sites on three islands (Oahu, Kauai, and Hawaii) were sampled to determine how habitat alteration resulting from urbanization and development was associated with the establishment of introduced species. Undeveloped sites had higher streamflow velocities, more riffles, lower embeddedness, deeper water, larger substrate, and lower water temperature than developed sites. Developed sites additionally had more pools and greater sparseness of riparian canopy cover. Overall, 23 fish species from 11 families and 5 crustacean species from 3 families were collected. Of these, 16 fish species and 3 crustacean species were introduced. Developed sites had on average almost twice as many species as undeveloped sites and were dominated by introduced species. Low-elevation sites were the most developed and supported the highest number of introduced species. However, species composition at some relatively undeveloped sites was impacted by downstream habitat alteration, since all native species must pass through the lower reaches to complete their life cycles. With increasing urbanization and development, the habitat features required by native species are disappearing and streams are becoming more suitable for generalist introduced species, which are typically better adapted for altered habitats than are native species. As development pressures in tropical island ecosystems increase worldwide, this will become an increasingly important issue globally. An understanding of which habitats are most likely to support nonnative species provides information necessary for developing a management strategy to protect aquatic ecosystems from invasive nonnative species.