Urbanization is regarded a major global threat to biodiversity and ecosystem functioning. Streams are among the most severely affected ecosystems due to worldwide urbanization. An increase in urbanization causes water quality deterioration and loss of habitat heterogeneity in streams. However, it is unclear how water quality deterioration and loss of habitat heterogeneity due to urbanization affect multitrophic diversity and performance of ecosystem functioning. We conducted 2,400 samplings in six streams across Uruguay to investigate how increases in urbanization (area and percentage of urbanization) affect the richness of three trophic groups of fishes and the standing stock biomass of the streams. We investigated the direct and indirect effects, mediated by water quality deterioration and habitat heterogeneity of the urbanization on carnivore, omnivore, and detritivore fish richness and standing stock biomass of streams. The increase in urbanization (area and percentagem) in the streams significantly decreased the richness of carnivores, omnivores, and detritivores fishes. The increase in urbanization also strongly decreased habitat heterogeneity and increased water quality deterioration, which indirectly decreased the carnivore, omnivore, and detritivore fish richness. Urbanization also had strong negative effects on the standing stock biomass of the streams. Our study illustrates that urbanization promotes water quality deterioration and loss of habitat heterogeneity in streams, which indirectly causes loss of multitrophic fish richness and biomass production of streams.