We surveyed the habitat and fish assemblages of four impounded and three unimpounded neighboring headwater streams, separated longitudinally into multiple upstream and downstream reaches. Instream habitat characteristics were similar between reaches of unimpounded streams and reaches above impoundments, and differed significantly from reaches below impoundments that included deeper water and more stable flows. Species richness was similar above and below impoundments, and between impounded and unimpounded streams, but fish assemblage composition and structure differed. Stream reaches above impoundments supported higher percentages of centrarchids compared to upper reaches of unimpounded streams, which had more obligate stream cyprinids. Reaches below impoundments supported mainly centrarchid species whereas lower reaches of unimpounded streams supported a balanced mix of cyprinids and centrarchids. Percina maculata (Blackside Darter) occurred throughout the study area except in upper reaches of impounded streams, illustrating how stream fragmentation can lead to localized extirpations. Changes to the fish assemblages in reaches above impoundments were due to the loss of downstream connectivity, and changes to the fish assemblages below impoundments were due to alterations of instream habitat caused by the impoundments. Small impoundments can have important effects on fish faunas of small geographical areas, but also potentially large cumulative effects if distribution of impoundments is not administered strategically at the scale of the river basin. We caution that continual population increase, recent droughts, and projected changes in climate patterns are prompting a renewed interest in impoundment construction, and urge close regulatory oversight over such projects.