The assemblage of stream habitat types can drive biofilm composition and activity in headwater streams, thereby influencing rates of ecosystem function. However, the influence of human-induced alterations to the distribution of benthic habitat such as construction, land-use changes and restoration on biofilm-mediated processes has not been well studied. We measured nutrient uptake of ammonium, nitrate and phosphate, as well as gross primary production and community respiration in three streams in Michigan, USA, each with an upstream reference and a downstream restored reach. The restoration included a 10-m sediment trap, paired with 40–60 m of gravel and boulder added downstream and designed to retain sediment, stabilize banks and provide spawning habitat for trout. We sampled four times in the six stream reaches from May 2006 to September 2007. Across streams, restored reaches reflected the structural manipulation with increased predominance of coarse inorganic sediments, higher gas exchange rate and increased transient storage. However, nutrient uptake and community respiration rates were different between reaches at only one site. The ecosystem response by this stream was driven by the large differences in coarse inorganic habitat between reference and restored reaches. We conclude that restorations of benthic habitat which are visually conspicuous, such as creation of settling pools and gravel-filled reaches, did not universally affect stream ecosystem function. Initial conditions and magnitude of change may be key factors to consider in explaining functional responses, and predicting the influence of habitat restoration on ecosystem function remains a challenge. Copyright © 2011 John Wiley & Sons, Ltd.