A computer model for stream water temperature was developed, and tested in a small pasture stream near Hamilton, New Zealand. The model quantifies shading by riparian vegetation, hillsides, and stream banks using three coefficients: canopy angle, topography angle, and canopy shade factor. Shade was measured directly and found to vary significantly along the channel. Using the maximum measured shade, a close match was achieved between observed and predicted daily maximum and minimum water and bed sediment temperature. Model predictions of incoming and outgoing long‐wave radiation flux closely matched measurements, but there were unexplained discrepancies in short‐wave radiation flux. Model predictions indicate that moderate shade levels (c. 70%) may be sufficient in temperate climates to restore headwater pasture stream temperatures to 20°C, an estimate of the thermal tolerance for sensitive invertebrates.