Decomposition of organic matter, a fundamental ecological process, has been proposed to be used as a functional indicator of stream condition. A recently published protocol for the use of the cotton-strip assay as a standardized measure of decomposition rates provided a basis for the use of decomposition as an indicator. However, some factors that may influence the application of the cotton-strip assay, such as the deployment season, remain largely unexplored. To further establish the technique, we studied temporal and spatial variability in cotton-strip decomposition rates along small upland rivers in SE Australia. We found a consistent longitudinal pattern in decomposition rates throughout the year, inspite of large within-site and site-specific temporal variability. Results from the models of temporal variability in decomposition rates indicate that differences in the duration of incubation might have been a confounding variable. Models of spatial variability in decomposition rates explained 45% and 52% of the variability in decomposition rates across five rivers, with diel temperature range being the most important predictor, accounting for ca. 20% of the variability in decomposition rates. We have shown that additional considerations are needed, if decomposition rates are to be compared across spatial and temporal scales. First, large within-site variability in decomposition rates, found in our and other studies,might prevent comparisons with reference conditions. Second, the length (and therefore the season) of cotton-strip deployment needs to be specified, since the exponential decomposition coefficient appears not to be a constant throughout time. Third, diel temperature range needs to be considered when establishing sampling protocols, since the exponential decay coefficient appears to change non-linearly with changing temperature, and therefore, using only daily mean temperatures does not realistically reflect the effect of temperature. The importance of temperature range also has implications for stream rehabilitation, showing that restoring the temperature regime contributes to the restoration of a fundamental ecosystem process.