In addition to potential benefits, biotechnology in silviculture may also be associated with environmental considerations, including effects on organisms associated with the living tree and on ecosystems and processes dependent on tree residue. We examined whether genetic modification of lignin characteristics (CAD and COMT) in Populus sp. affected leaf litter quality, the decomposition of leaf litter, and the assemblages of aquatic insects colonizing the litter in three natural streams. The decomposition of leaf litter from one of the genetically modified (GM) lines (CAD) was affected in ways that were comparable over streams and harvest dates. After 84 days in streams, CAD-litter had lost approximately 6.1% less mass than the non-GM litter. Genetic modification also affected the concentration of phenolics and carbon in the litter but this only partially explained the decomposition differences, suggesting that other factors were also involved. Insect community analyses comparing GM and non-GM litter showed no significant differences, and the two GM litters showed differences only in the 84-day litterbags. The total abundance and species richness of insects were also similar on GM and non-GM litter. The results presented here suggest that genetic modifications in trees can influence litter quality and thus have a potential to generate effects that can cross ecosystem boundaries and influence ecosystem processes not directly associated with the tree. Overall, the realized ecological effects of the GM tree varieties used here were nevertheless shown to be relatively small.