The Millennium Drought (southeastern Australia) provided a natural experiment to challenge the assumption that watershed streamflow always recovers from drought. Seven years after the drought, the runoff (as a fraction of precipitation) had not recovered in 37% of watersheds, and the number of recovered watersheds was not increasing. When recovery did occur, it was not explained by watershed wetness. For those watersheds not recovered, ∼80% showed no evidence of recovering soon, suggesting persistence within a low-runoff state. The post-drought precipitation not going to runoff was found to be likely going to increased evapotranspiration per unit of precipitation. These findings show that watersheds can have a finite resilience to disturbances and suggest that hydrological droughts can persist indefinitely after meteorological droughts.