A monthly monitoring program of periphyton was conducted on two main urban rivers of Shanghai from April 2005 to March 2006. Parameters of periphyton assemblage and main environmental variations, including physical habitation and hydrological factors, were analyzed by multivariate analyses (cluster analysis, indicator species analysis and canonical correspondence analysis). It showed that a remarkable spatial-temporal variation pattern was observed for periphyton assemblage: taxa numbers and density were abundant at upstream in warm weathers, while diversity decreased significantly at downstream in cold seasons (p < 0.05). The results also indicated that water quality, watershed function zone and nutrients (i.e. nitrogen and phosphorus) were the main environmental factors influencing periphyton species composition. The findings further suggested 12 periphyton species, including Navicula cincta, Chroococcus minutus and Fragilaria capucina, had significant indicator values for water quality and were highly sensitive to the concentrations of nitrogen and phosphorus, and these species could serve as a good bio-indicator of urban watersheds.