Tremendous opportunities exist for enhancing water quality and improving aquatic habitat by actively managing urban water infrastructure to operate in conjunction with natural systems. The hyporheic zone (HZ) of streams, which is the area of active mixing between surface water and groundwater, is one such system that is overlooked by many water professionals, because the state of the science on this topic has not been transferred into practice. As a biogeochemically active zone, the HZ offers great potential to provide natural treatment of organic compounds, nutrients, and pathogens in urban streams, which are often strongly impacted by flow modifications and water pollution. Reliable treatment is most likely in streams in which the majority of flow occurs through the HZ, the flow is aerated, and sufficient residence times occur, which may be limited to specific channel morphologies and seasons. Integration of the HZ into stream management plans could also provide quality habitat in a landscape with increasingly depauperate biodiversity. Here, we review current knowledge on hydrological, chemical, and biological aspects of the HZ, with a focus on urban settings, and include a set of examples drawn from the literature of low-flow, effluent-dominated streams in which there is significant hyporheic flow and potential for contaminant attenuation. The HZ can be incorporated much more effectively into urban water management, including stream restoration efforts, by understanding the surface and subsurface features conducive to HZ flow and the water-quality and biodiversity improvements that can be gained in the HZ without posing unreasonable risk. The main barriers to implementation of HZ considerations include lack of information, absence of established metrics for evaluating success, small number of controlled HZ experiments in urban settings, and concern over risks to both public health and aquatic organisms. A combination of field studies, laboratory experiments, and model development that consider hydrological, chemical, and biological interactions in the HZ can overcome these barriers.