The role of microbial communities in the degradation of trace organic contaminants in the environment is little understood. In this study, the biotransformation potential of 27 pharmaceuticals and endocrine-disrupting compounds was examined in parallel with a characterization of the native microbial community in water samples from four sites variously impacted by urban run-off and wastewater discharge in Lake Mead, Nevada and Arizona, USA. Samples included relatively pristine Colorado River water at the upper end of the lake, nearly pure tertiary-treated municipal wastewater entering via the Las Vegas Wash, and waters of mixed influence (Las Vegas Bay and Boulder Basin), which represented a gradient of treated wastewater effluent impact. Microbial diversity analysis based on 16S rRNA gene censuses revealed the community at this site to be distinct from the less urban-impacted locations, although all sites were similar in overall diversity and richness. Similarly, Biolog EcoPlate assays demonstrated that the microbial community at Las Vegas Wash was the most metabolically versatile and active. Organic contaminants added as a mixture to laboratory microcosms were more rapidly and completely degraded in the most wastewater-impacted sites (Las Vegas Wash and Las Vegas Bay), with the majority exhibiting shorter half-lives than at the other sites or in a bacteriostatic control. Although the reasons for enhanced degradation capacity in the wastewater-impacted sites remain to be established, these data are consistent with the acclimatization of native microorganisms (either through changes in community structure or metabolic regulation) to effluent-derived trace contaminants. This study suggests that in urban, wastewater-impacted watersheds, prior exposure to organic contaminants fundamentally alters the structure and function of microbial communities, which in turn translates into greater potential for the natural attenuation of these compounds compared to more pristine sites.