In woodland streams, the decomposition of allochthonous organic matter constitutes a fundamental ecosystem process, where aquatic hyphomycetes play a pivotal role. It is therefore greatly affected by water temperature and nutrient concentrations. The individual effects of these factors on the decomposition of litter have been studied previously. However, in the climate warming scenario predicted for this century, water temperature and nutrient concentrations are expected to increase simultaneously, and their combined effects on litter decomposition and associated biological activity remains unevaluated. In this study, we addressed the individual and combined effects of water temperature (three levels) and nutrient concentrations (two levels) on the decomposition of alder leaves and associated aquatic hyphomycetes in microcosms. Decomposition rates across treatments varied between 0.0041 day−1 at 5 °C and low nutrient level and 0.0100 day−1 at 15 °C and high nutrient level. The stimulation of biological variables at high nutrients and temperatures indicates that nutrient enrichment of streams might have a higher stimulatory effect on fungal performance and decomposition rates under a warming scenario than at present. The stimulation of fungal biomass and sporulation with increasing temperature at both nutrient levels shows that increases in water temperature might enhance fungal growth and reproduction in both oligotrophic and eutrophic streams. The stimulation of fungal respiration and litter decomposition with increasing temperature at high nutrients indicates that stimulation of carbon mineralization will probably occur at eutrophied streams, while oligotrophic conditions seem to be ‘protected’ from warming. All biological variables were stimulated when both factors increased, as a result of synergistic interactions between factors. Increased water temperature and nutrient level also affected the structure of aquatic hyphomycete assemblages. It is plausible that if water quality of presently eutrophied streams is improved, the potential stimulatory effects of future increases in water temperature on aquatic biota and processes might be mitigated.