Urbanization substantially modifies surface water and energy cycles. Compared to natural vegetation, low-permeability urban surfaces produce more runoff, trap more heat, and lower evapotranspiration. Further, the “double whammy” of increases in extreme rainfall and heat generated by climate change are further amplified by the urban heat island effect and it’s feedback on precipitation processes. One way cities are adapting to regional climate hazards is through adopting nature-based solutions or green infrastructure, which reduces the hydrologic impacts of urbanization and more closely mimics surrounding natural watersheds. Management practices like depaving or adding tree canopy can enhance evaporative cooling and provide shade for pavements, which also contribute to urban heat. Current efforts to represent urban hydrology in city-to-regional scale climate models are too simplistic to fully capture the hydrologic impacts of these fine-scale management efforts, yet they must be resolved if we hope to understand the holistic effects that nature-based solutions provide to the urban climate and water and energy cycles. To this end, we present regional climate simulations centered on Milwaukee, Wisconsin. An initial simulation uses a traditional representation of urban areas while a second simulation uses a custom land surface model to explicitly represent the fine-scale lateral movement of surface water amongst the highly heterogeneous land cover types common in urban areas. We show that the inclusion of urban vegetation and lateral surface water transfers associated with green infrastructure practices alters water budgets across the city and simultaneously increases evapotranspiration and decreases sensible and ground heat fluxes on daily time scales. These changes reduce air temperatures within the city and change regional atmospheric processes such as lake breeze coupling during warm days. We also show that urban environments respond differently within regional climate models after rainfall events in non-negligible ways. This work highlights the need to explicitly represent fine-scale urban water and energy cycle components in regional climate simulations, especially when considering the implications of widespread adoption of green infrastructure.