AbstractWe designed and constructed a natural channel (hereafter, engineered stream; length = 284 m, flow rate = 0.08 m3/s) and compared weight, length, and condition factor between hatchery coho salmon Oncorhynchus kisutch (brood years [BYs] 2000 and 2002) reared in the engineered stream and those reared at Dungeness Hatchery, Washington, under similar temperature regimes. In addition, we compared rearing density, egg‐to‐smolt survival, smolt density, and smolt capacity in the engineered stream with reported reference values for wild coho salmon in rivers. Mean weight and length of fish reared in the engineered stream were 8‐32% and 39‐154% less, respectively, than those of fish reared in the hatchery. Mean condition factor was 1.6‐3.1% greater for fish reared in the engineered stream than for fish reared in the hatchery. Mean monthly growth differed between the engineered stream and hatchery treatment groups; fish in the engineered stream lost weight during the winter, and those in the hatchery gained weight. Rearing density (245%), smolt density (93‐209%), egg‐to‐smolt survival (61‐158%), and smolt capacity (219‐411%) in the engineered stream were greater than reported reference values for wild coho salmon in natural systems. The BY 2000 return rate was 2.61% for hatchery‐reared fish versus 2.55% for fish from the engineered stream. The BY 2002 return was 0.38% for hatchery fish versus 0.12% for fish from the engineered stream. The most important findings of this study are that engineered streams (1) produce smaller fish exhibiting condition factors and smolt‐to‐adult return rates similar to those of fish produced by hatcheries, (2) have a greater rearing capacity than natural habitat, and (3) may be an important approach for restoring the rearing capacity of rivers.