Hydrologic and chemical characteristics were determined for both riparian and hyporheic subsurface flow along a 100-m reach of a sandy-bottom tributary of the Rio Icacos in the Luquillo Experimental Forest, Puerto Rico. Hydrologic data (vertical hydraulic gradient and hydraulic conductivity of streambed sediments) and the topographic and morphological features of the watershed indicated diffuse inputs of groundwater from the near-stream riparian zone along this site. Cumulative groundwater discharge, determined by tracer dilution techniques, was ~1.5 L/s or 10% of the total stream discharge. Spatial heterogeneity in hydrologic and chemical properties of riparian and hyporheic sediments was large. Hydraulic conductivity explained much of the variation in NH4-N and dissolved organic carbon (DOC) concentrations, with highest concentrations in sites having low conductivity. A mass-balance approach was used to examine the influence of the near-stream zone on nutrient transport and retention. Outwelling riparian groundwater had the potential to increase stream N concentrations by up to 84% and DOC concentrations by up to 38% along our 100-m reach. Because stream concentrations were constant downstream despite this input, we conclude that significant N and C retention or loss were occurring in the near-stream zone. Lotic ecosystems and their associated riparian groundwater can have a quantitatively significant impact on the nutrient budgets of tropical headwater catchments.