Extremely high temperatures, which negatively affect the human health and plant performances, are becoming more frequent in cities. Urban green infrastructure, particularly trees, can mitigate this issue through cooling due to transpiration, and shading. Temperature regulation by trees depends on feedbacks among the climate, water supply, and plant physiology. However, in contrast to forest or general ecosystem models, most current urban tree models still lack basic processes, such as the consideration of soil water limitation, or have not been evaluated sufficiently. In this study, we present a new model that couples the soil water balance with energy calculations to assess the physiological responses and microclimate effects of a common urban street-tree species (Tilia cordata Mill.) on temperature regulation. We contrast two urban sites in Munich, Germany, with different degree of surface sealing at which microclimate and transpiration had been measured. Simulations indicate that differences in wind speed and soil water supply can be made responsible for the differences in transpiration. Nevertheless, the calculation of the overall energy balance showed that the shading effect, which depends on the leaf area index and canopy cover, contributes the most to the temperature reduction at midday. Finally, we demonstrate that the consideration of soil water availability for stomatal conductance has realistic impacts on the calculation of gaseous pollutant uptake (e.g., ozone). In conclusion, the presented model has demonstrated its ability to quantify two major ecosystem services (temperature mitigation and air pollution removal) consistently in dependence on meteorological and site conditions.