Stream fish assemblages in small streams are often less diverse than those in larger streams. Two models to explain this have emerged, one which focuses on local habitat conditions derived from processes related to discharge, and the other which links patterns of network connectivity to dispersal ability and network position in the watershed. Both models now have some support in stream fishes, but how they might interact is not well studied. We draw on observations from stream invertebrates to propose that stream size will affect niche specialization and network position will affect functional trait-based diversity. We test this hypothesis using data from the Interior Highlands, USA. Diversity of upland-adapted groups and trait-based assemblage metrics tied to strategies dependent on depth, flow, and stream width showed strong relationships to stream size. Diversity of lowland-adapted groups and metrics of assemblage morphological diversity showed strong relationships to network position. Examination of patterns of spatial b-diversity supports the idea that dispersal of lowland-adapted groups is linked to network connectivity. Responses to both network position and stream size included longer, later reproductive seasons with more species exhibiting parental care. We support that both stream size and network position interact to lower fish diversity in small streams, but that they do so in different manners. We further discuss the ecological uniqueness and need for research and conservation efforts of small streams low in watershed networks.