Regression-type, hybrid empirical/process-based models (e.g., SPARROW, PolFlow) have assumed a prominent role in efforts to estimate the sources and transport of nutrient pollution at river basin scales. However, almost no attempts have been made to explicitly accommodate interannual nutrient loading variability in their structure, despite empirical and theoretical evidence indicating that the associated source/sink processes are quite variable at annual timescales. In this study, we present two methodological approaches to accommodate interannual variability with the Spatially Referenced Regressions on Watershed attributes (SPARROW) nonlinear regression model. The first strategy uses the SPARROW model to estimate a static baseline load and climatic variables (e.g., precipitation) to drive the interannual variability. The second approach allows the source/sink processes within the SPARROW model to vary at annual timescales using dynamic parameter estimation techniques akin to those used in dynamic linear models. Model parameterization is founded upon Bayesian inference techniques that explicitly consider calibration data and model uncertainty. Our case study is the Hamilton Harbor watershed, a mixed agricultural and urban residential area located at the western end of Lake Ontario, Canada. Our analysis suggests that dynamic parameter estimation is the more parsimonious of the two strategies tested and can offer insights into the temporal structural changes associated with watershed functioning. Consistent with empirical and theoretical work, model estimated annual in-stream attenuation rates varied inversely with annual discharge. Estimated phosphorus source areas were concentrated near the receiving water body during years of high in-stream attenuation and dispersed along the main stems of the streams during years of low attenuation, suggesting that nutrient source areas are subject to interannual variability.