This study involved field observations in Squaw Creek watershed, located in central Iowa, to investigate the impact of a heavy rain event (rainfall of 71 mm in 24 h) on E. coli levels in the streambed sediment and overlying water. We assessed relationships between streamflow and E. coli and nutrient levels in the water column and streambed sediment. The results showed that during a heavy rain event, E. coli levels in the water column varied considerably, ranging from 360 to 37,553 CFU per 100 mL with a mean of 7,598 CFU per 100 mL. Elevated streamflow resulted in greater levels of E. coli in the water column. Streambed sediment E. coli levels ranged from 896 to 6,577 CFU per 100 g with a mean of 3,355 CFU per 100 g. Regression analysis found exponential relationships between streamflow and E. coli levels in the water column (R² = 0.56) and between streamflow and E. coli levels in the streambed sediment (R² = 0.45). R² values of the exponential relationship between streamflow and water column E. coli levels increased considerably when regressions for the rising and falling limbs of the hydrograph were performed separately (R² = 0.64 and 0.94, respectively). The exponential relationship between total suspended solids (TSS) and water column E. coli levels yielded an R² of 0.38, while TSS and streamflow yielded an exponential relationship with an R² of 0.64. The results presented here provide information on in-stream bacteria dynamics of an agricultural watershed during the first heavy rain of the season. We anticipate that the results will improve the understanding of in-stream E. coli transport during rain events and provide insight for policy makers to allocate E. coli loads in impaired water bodies.