Headwater streams drain the majority of most landscapes, yet less is known about their morphology and sediment transport processes than for lowland rivers. We have studied headwater channel form, discharge and erosive power in the humid, moderate‐relief Valley and Ridge and Blue Ridge provinces of the Appalachian Mountains. Field observations from nine headwater (<2 km² drainage area), mixed bedrock–alluvial channels in a variety of boundary conditions demonstrate variation with respect to slope‐area channel initiation, basic morphology, slope distribution, hydraulic geometry, substrate grain size and role of woody debris. These channels display only some of the typical downstream trends expected of larger, lowland rivers. Variations are controlled mainly by differences in bedrock resistance, from the formation level down to short‐wavelength, outcrop‐scale variations. Hydrologic modeling on these ungauged channels estimates the recurrence of channel‐filling discharge and its ability to erode the channel bed. Two‐year recurrence discharge is generally larger and closer to bankfull height in the Valley and Ridge, due to low soil infiltration capacity. Discharge that fills the channel to its surveyed bankfull form is variable, generally exceeding two‐year flows at small drainage areas (<0·5 km²) and being exceeded by them at greater drainage areas. This suggests bankfull is not controlled by the same recurrence storm throughout a channel or physiographic region. Stream power and relative competence are also variable. These heterogeneities contrast relations observed in larger streams and illustrate the sensitivity of headwater channels to local knickpoints of resistant bedrock and armoring of channels by influx of coarse debris from hillslopes. The general lack of predictable trends or functional relationships among hydraulic variables and the close coupling of channel form and function with local boundary conditions indicate that headwater streams pose a significant challenge to landscape evolution modeling. Copyright © 2005 John Wiley & Sons, Ltd.