The streambed is the critical interface between the aquatic and terrestrial systems and hosts important biogeochemical hot spots within river corridors. Although the streambed characteristics are significantly different from those of its surrounding soil, the streambed itself has not been explicitly represented in watershed models. We developed an integrated hydrologic model that explicitly incorporated a streambed layer to examine the hydrological effects of streambed characteristics including hydraulic conductivity (K), layer thickness, and width on the exchange fluxes across the streambed as well as the streamflow at the watershed outlet. The numerical experiments were performed in the American River Watershed, a headwater, mountainous watershed within the Yakima River Basin in central Washington. Despite having a negligible effect on the watershed streamflow, an explicit representation of the streambed with distinctive properties dramatically changed the magnitude and variability of the exchange flux. In general, larger streambed K along with a thicker streambed layer induced larger exchange fluxes. The exchange flux was most sensitive to the streambed width or the mesh resolution of the streambed. A smaller streambed width (or a finer streambed resolution) increases exchange fluxes per unit area while reducing the overall exchange volumes across the entire streambed. The amount of baseflow decreased by 6% as the streambed width decreased from 250 m to 50 m. This finding is important because these hydrological changes may in turn affect the exchange of nutrients and contaminants between surface water and groundwater and the associated biogeochemical processes. Our work demonstrated the importance of representing streambed in fully distributed, process-based watershed models in better capturing the exchange flow dynamics in river corridors.