The roles of terrestrial and instream processes in controlling stream‐water N and P concentrations were studied over a 2‐yr period in a deciduous forest stream in eastern Tennessee. Upper soil horizons were highly effective sinks for inorganic N and P in throughfall, and weathering of the parent dolomite was the dominant source of inorganic P to the stream. The riparian zone was a potential source of NH4+ and P to the stream when dissolved oxygen concentrations in riparian groundwater were low, but a sink for P when dissolved oxygen concentrations were high. High rates of instream immobilization of inorganic N and P were observed from late autumn to spring, primarily as a result of uptake by microbes on decomposing leaves and secondarily by algae. Immobilization of inorganic N and P resulted in longitudinal declines in concentrations with distance downstream from groundwater inputs (springs), thereby increasing the importance of organic forms of these nutrients in stream water in downstream reaches. The seasonal pattern of winter minima and summer maxima in stream‐water N and P concentrations observed here is opposite to the pattern observed in many northern streams, suggesting the importance of winter nutrient cycling processes in soils and streams in warmer climates.