Benthic diatom assemblages on the natural substrata were investigated at 21 sites of the Ganhe River watershed (China) once per season and in addition, early spring in 2013. A total of 487 diatom taxa from 36 genera were identified during five investigations. The assemblages were dominated by Achnanthidium minutissimum (Kützing) Czarnecki and Cocconeis placentula in the rural reach, whereas Navicula, Nitzschia, and Gomphonema species were characteristic of urbanized sites. Our results suggest that biodiversity was positively related to high nutrient levels and strongly negatively related to diatom-based indices. The periphyton biomass (expressed as chlorophyll a and ash-free dry mass) was not related to water quality. Canonical correspondence analysis (CCA) showed that the nutrient concentration gradient was the most important factor that affected the diatom assemblage composition and species distribution. The diatom-based indices (specific pollution sensitivity index (IPS), biological diatom index (IBD), and trophic diatom index (TDI)) were significantly positively correlated with water quality and are adequate for use in China. Slight changes in the biodiversity and diatom-based indices followed a temporal pattern. The species composition was less related to the season or hydrological characteristics of the river but more strongly related to differences in the trophic status. In this region, urbanization masked the impact of rural land use on benthic diatoms. The research will expand the understanding of using benthic diatom assemblages for water quality monitoring in urban streams and improve watershed-scale management and conservation efforts in the Ganhe River, China.