Understanding seasonal partitioning of water in riparian areas is important for assessing how vegetation affects water resources. A combined hydrological‐isotopic field study was conducted within a headwater catchment to explore the dynamics of stream discharge and the effect of riparian evapotranspiration on summer low‐flow conditions. In addition to collection of meteorological data and depth to unconfined groundwater, streamflows were measured at three locations along the length of the river. Isotope ratios of local precipitation, stream water, groundwater, and willow xylem water were used to estimate pathways and sources of water used by vegetation. Using meteorological variables, leaf area index and stand area measurements, willow transpiration was estimated using the Penman–Monteith method. Combining the data from hydrometric, isotope, and vegetation evapotranspiration analysis revealed that water abstraction by stream‐side willows peaked to 5.6 mm/day and had a distinct impact on summer low‐flow conditions and patterns of stream discharge at the daily time scale. Average annual willow transpiration was 270 mm, whereas average annual precipitation during the study period was 1067 mm. However, willow transpiration reduced streamflow and altered water budgets most strongly during critical summer low‐flow periods. Our analysis of transit times, young water fraction, and depth to groundwater water data showed Waipara headwater areas have limited water storage capacity, making them vulnerable to annual variations in precipitation and any other changes in water usage. Removal of streamside willows could potentially influence water balance during summer months when flows tend to be the lowest.