The relationship between catchment storage and discharge is nonlinear. The dynamicity of this relationship is dependent on the distance of the storage measurement from the stream, the depth of the soil moisture (SM) measurement, antecedent SM storage, and precipitation characteristics. Understanding the relative influence of these factors is critical for interpreting runoff generation processes and predicting discharge. In this study, we used a hysteresis index approach and analysed the nonlinear dynamics of catchment storage–discharge relationship across points, hillslope and catchment scales, and their controlling factors. A small headwater forested catchment located in the southern part of the Sierra Nevada region, California, was selected as a case study. In this Mediterranean catchment, the anticlockwise class IV hysteresis loop, indicating an earlier discharge peak than SM, was observed as a prevalent hysteresis class across all the scales, irrespective of seasons (i.e., dry vs. wet) and years (i.e., normal vs. drought). A few clockwise hysteresis loops were observed at the shallow depths (10 and 30 cm) of upslope and lower slope topographic positions. Further, we found a shorter lag time between SM peak to discharge peak at 60 and 90 cm soil depths during the wet season, and during the drought period. The shorter lag at the deeper depth was due to the presence of subsurface flow during high antecedent SM storage conditions and preferential flow through the soil pores during the drought periods. The variability in hysteresis at catchment and hillslope scales was controlled by peak rainfall intensity and antecedent SM storage. However, rainfall characteristics (intensity and depth) were major governing factors for most of the point scale locations. Overall, the current study highlighted the role of SM sensor's location in characterizing storage–discharge behaviour.