Since the discovery of trace concentrations of pharmaceuticals in streams and treated drinking water around the world, a call has been made by both the scientific community and the general public to increase understanding of the potential effects these compounds may have on freshwater integrity. We measured abundance and distribution of pharmaceuticals in headwater streams across the Upper White River Watershed of central Indiana. Four nonprescription pharmaceuticals (1,7-dimethylxanthine, caffeine metabolite; acetaminophen; caffeine; cotinine, nicotine metabolite) were found at one or more sites with mean concentrations of 0.038, 0.109, 0.057 and 0.041 μg/l, respectively. Caffeine was measured at trace concentrations at all sites sampled. Higher pharmaceutical concentrations were associated with streams having >90% agricultural land use in the sub watershed, suggesting that nonpoint sources, such as septic tanks, may contribute to stream pharmaceutical contamination. To assess the influence of these pharmaceuticals on stream microbial activity, we measured changes in sediment respiration and nutrient uptake in response to pharmaceuticals using both in vitro and in situ techniques. For in vitro experiments, respiration rates were not significantly different from controls with pharmaceutical exposure. However, net NO(3) (-)-N uptake increased significantly with nicotine concentrations. Net NH(4)(+)-N uptake was reduced in response to caffeine and nicotine exposure. In situ experiments indicated nicotine exposure increased microbial respiration. Our data show pharmaceuticals are ubiquitous in headwater streams of central Indiana and likely influence stream microbial activity depending on the pharmaceutical compound and history of exposure.