Technical Abstract: Considerable public funds are annually expended on stream restoration projects, but available science suggests that stream restoration as currently practiced is not effective in recovering ecosystem functional integrity. The physical scale of most stream restoration projects is insufficient because watershed land use controls ambient water quality and hydrology, and land use surrounding many restoration projects at the time of their construction, or in the future, do not provide sufficient conditions for functional integrity recovery. Reach scale channel restoration or modification has limited benefits within the broader landscape context. Physical habitat variables are often the basis for indicating success, but are now increasingly seen as poor surrogates for actual biological function; the assumption ‘if you build it they will come’ is proving to be flawed and lacks support of empirical studies. If stream restoration is to play a continued role in compensatory mitigation under the U.S. Clean Water Act, then significant policy changes are needed. When used for compensatory mitigation, stream restoration should be held to some standards for actual and measurable physical, chemical, or biological functional improvement. To achieve this, greater flexibility may be required for the location of restoration projects, the size of projects, and the restoration process itself.