Taxonomic-based multimetric indices (MMIs) have been widely employed for assessing ecosystem status, particularly through the use of stream macroinvertebrate assemblages. However, the functional diversity and composition of assemblages is also important for maintaining stream ecosystem condition. Nonetheless, aquatic insect functional diversity and composition have not commonly been included in MMIs. Our goal was to advance our understanding of the performance and ecological interpretation of an MMI that potentially combined functional and taxonomic metrics. We sampled aquatic insects and natural and land-use variables at 74 temperate Chinese streams. We selected a candidate set of 36 functional and 20 taxonomic metrics that were screened by range tests, natural variation, responsiveness to anthropogenic disturbance, and redundancy for subsequent inclusion in MMIs. We determined if natural variation adjustments improved the performance of a functional-taxonomic MMI. Finally, we evaluated the degree to which the functional-taxonomic MMI served as an early-warning indicator of land use intensity. Natural variation explained between 19.62% and 71.02% of metric variability, indicating that functional metrics changed systematically along natural gradients. The final functional-taxonomic MMI adjusted for natural variation incorporated multiple aspects of assemblage characteristics: functional richness, Rao's quadratic entropy, abundance-weighted frequency of soft bodies, abundance-weighted frequency of predators, and number of Diptera taxa. In contrast to the natural variation unadjusted MMI, the functional-taxonomic adjusted MMI clearly distinguished least-disturbed sites from most-disturbed sites, exhibited high precision and low bias, and showed a significant negative response to land uses. The slope of a linear regression relative to 0-10% urban and 0-20% agriculture was significantly steeper for the functional-taxonomic adjusted MMI than that of the taxonomic adjusted MMI. We conclude that functional-taxonomic adjusted MMIs are more effective indicators of ecological condition and risks to biota from human pressures than are purely taxonomic unadjusted MMIs because functional-taxonomic MMIs are more sensitive to subtle anthropogenic pressures.