In mountainous areas, high-head-storage hydropower plants produce peak load energy. The resulting unsteady water release to rivers, called hydropeaking, alters the natural flow regime. Mitigating the adverse impacts of hydropeaking on aquatic ecosystems has become a crucial step in recent water policies. We developed a novel economic-ecological diagnostic and intervention method to assess hydropeaking mitigation measures for fish habitat improvement. This method was applied to an Alpine river downstream of a complex storage hydropower scheme. The approach comprises (1) a hydropower operation model of flow regime generation and cost estimates for different mitigation measures, (2) a two-dimensional hydrodynamic model to simulate the flow conditions in representative river reaches and (3) a dynamic fish habitat simulation tool to assess the sub-daily changes in habitat conditions of three brown trout (Salmo trutta fario) life stages (adult, spawning and young-of-the-year). Simulations showed that operational measures such as limiting maximum turbine discharge, increasing residual flow and limiting drawdown range incur high costs in relation to their ecological effectiveness. Compensation basins and powerhouse outflow deviation achieved the best cost–benefit ratio. Hydropeaking impact was strongly dependent on river morphology. Monotonous river reaches exhibited low habitat suitability for peak discharge, whereas a braided morphology provided high in-stream structure and thus suitable habitat for unsteady flow conditions. The interdisciplinary approach to economic and habitat rating informs decision makers regarding the effectiveness of measures implemented to mitigate the environmental impacts associated with fluctuating hydropower operations. Copyright © 2013 John Wiley & Sons, Ltd.