In mixed-use, suburban watersheds, stormwater runoff from impervious surfaces on both public and private property can impair stream ecosystems. Decentralized stormwater management, which distributes stormwater infiltration and retention devices throughout watersheds, is more effective than centralized options at mimicking the natural hydrologic cycle and, therefore, restoring stream ecosystem health. However, decentralized stormwater management poses legal, social, and economic constraints, and requires extensive coordination between landowners and municipal authorities. By addressing these challenges in a multidisciplinary way from the onset, we have developed an approach which should be applicable to watersheds where stormwater runoff is a primary cause of stream impairment. This approach was tested in the Shepherd Creek watershed, a 1.8 km² residential and forested watershed in Cincinnati, OH (USA). In this watershed, a higher proportion of total impervious area (TIA) was on private land compared to public land (70.5% private vs. 29.5% public), with buildings and driveways comprising a combined 52.2% TIA. Therefore, private land was initially targeted for stormwater best management practices (BMPs) in the form of rain gardens and rain barrels. After evaluating multiple incentive mechanisms, we decided to use a reverse auction to allocate BMPs. We will provide free BMPs plus financial compensation to homeowners with the lowest bids and maximum potential environmental benefits. This voluntary, market-based approach is expected to ensure cost effectiveness while avoiding potential legal constraints regarding landowners’ private property rights. Stream hydrology, water quality, and biota are being monitored using a before-after-control-treatment experimental design to assess the viability of this approach for restoring stream ecosystem health.