A scheme is outlined to classify watersheds as ecosystems, based on their natural attributes. Two physical factors of the environment, climate and geology, are selected as state factors. Climate is the master factor that supplies energy and water to all ecosystems; geologic structure supplied the material from which the forces of climate carve landforms to establish ecosystems. At the next lower level, soil and vegetation interact in a succession of transactions to produce a mosaic of tesseras within each watershed. It is these interacting tesseras that moderate climate and store energy within the ecosystem that influences the embedded stream. Thus, there is a controlling force consisting of two elements (Climate and geology), a reacting force (soil and vegetation) that responds by circular conditioning to controlling forces, and at the lowest level, the stream which responds to all factors of the living system within its watershed.