Small headwater streams have a suite of physical eccentricities that distinguishes them from the rest of the river system. These differences are now recognized in the study of sediment transport and channel morphology, but their implications for other limnological disciplines are less apparent. We suggest a zonation scheme for the upper stream system that acknowledges obvious geomorphic boundaries while highlighting differences in fine-scale habitat features that are likely to be biologically relevant. The upstream heterogeneous zone (UHZ) is distinguished by a high ratio of structural component size to stream width. Structural components include large rocks exposed from the regolith or from colluvial sources, tree roots, and woody debris, all of which are stochastically distributed and can constrain the morphology, hydraulics, and habitat distribution of small headwater streams. The high ratio of structural component size to stream width is a geomorphic phenomenon linked to the stream's lack of competence to move the material that forms its bed and banks. It follows that the incompetence of streams within the UHZ is ultimately responsible for their greater internal physical heterogeneity than downstream reaches and is a fundamental driver of their physical structure, dynamics, and possibly ecology. Benign hydraulic conditions in small headwater streams have the potential to uncouple the link between physical and biological heterogeneity, resulting in a faunal community composed of highly mobile generalists.