17β-estradiol (E2), one of the natural estrogen compounds, is an endocrine disruptor, and low levels in natural waters can impair the reproductive health of aquatic organisms. Its presence has been reported in animal faecal wastes and some aquatic habitats, including surface waters impacted by intense animal agriculture or sewage contamination. Little is known about its transport in hydrological systems or its persistence in water supplies. We routinely sampled stream and soil water over the growing season in an instrumented 1.2-km2 agricultural watershed in central Virginia. E2 concentrations in stream water ranged from 0.01 to 0.12 ng mL−1; soil-water values ranged from 0.03 to 0.18 ng mL−1. The highest concentrations were observed early in the growing season shortly after application of composted poultry litter to the cropped fields, and values decreased both with hydrological transport distance from the cropped field and over the course of the summer. Given the known application rate, E2 must be lost from the soil solution, and we explored biodegradation as a mechanism for this loss. A bacterial consortium cultured from the poultry compost biodegraded E2 in laboratory flasks amended with solutions of 1 : 1 acetate : glucose at concentrations ranging from 0.1 to 10 g L−1 dissolved organic carbon (DOC), spiked with 1.8 ng mL−1 E2, and incubated at different temperatures. A loss of 97–98% of the initial E2 occurred within 180 h in experiments at 22 °C and 28 °C with 1.0 or 0.1 g L−1 DOC amendments. Higher DOC concentrations and lower temperatures slowed the rates of reaction, suggesting that more readily available carbon inhibits use of the E2 by degrading micro-organisms. The rapid rates of biodegradation in the laboratory incubations are inconsistent with the persistence of E2 in the watershed. This suggests that either the rates of biodegradation are reduced compared with the laboratory experiments or that E2 probably interacts with the components of the natural environment through complexation, sorption or abiotic transformation in the ageing process that leads to diminished bioavailability.