The real‐time control of urban watersheds is now being enabled by a new generation of “smart” and connected technologies. By retrofitting stormwater systems with sensors and valves, it becomes possible to adapt entire watersheds dynamically to individual storms. A catchment‐scale control algorithm is introduced, which abstracts an urban watershed as a linear integrator delay dynamical system, parameterizes it using physical watershed characteristics, and then controls network flows using a Linear Quadratic Regulator. The approach is simulated on a 4‐km2 urban headwater catchment in Ann Arbor, Michigan, demonstrating the gains of a stormwater system that can adaptively balance between flood mitigation and flow reduction. We introduce an equivalence analysis and illustrate the performance of the controlled watershed across large events (30‐year storms) to show the uncontrolled passive watershed can only match it during smaller events (10‐year storm). For these smaller events, the storage volume of the controlled storage nodes (ponds, basins, and wetlands) could be reduced as much as 50% and still achieve the same performance of the controlled watershed. A controller placement analysis is also carried out, whereby all possible combinations of controlled sites are simulated across a wide spectrum of design storms. We show that the control of every storage node may not be needed in a watershed, but rather that in our case study a small subset (30%) of the overall watershed can be controlled in coordination to achieve outcomes that match a fully controlled system, even when tested across a long‐term rainfall record and under noisy sensor measurements.