This paper presents a novel modeling analysis of a 40-year-long dataset to examine the impact of urbanization, with widespread stormwater infiltration, on groundwater levels and the water balance of a watershed. A dataset on the hydrologic impact of urbanization with extensive stormwater infiltration is not widely available, and is important because many municipalities are considering infiltration as an alternative to traditional stormwater systems. This study analyzes groundwater level observations from an urban catchment located in Perth, Western Australia. The groundwater observation data cover approximately a 40-year-long period where land use changes (particularly due to urbanization) occurred; moreover, the monitored area contains both undeveloped and urbanized areas where stormwater infiltration is common practice via soakwells (shallow vertical infiltration wells). The data is analyzed using a distributed and dynamic hydrological model to simulate the groundwater response. The model explicitly couples a soakwell model with a groundwater model so that the performance of the soakwells is reduced by the increase of groundwater levels. The groundwater observation data is used to setup, calibrate and validate a coupled MIKE SHE-MIKE URBAN groundwater model and the model is used to quantify the extent of groundwater rise as a result of the urbanization process. The modeled urbanization processes included the irrigation of new established private and public gardens, the reduction of evapotranspiration due to a decrease in green areas, and the development of artificial stormwater infiltration. The study demonstrates that urbanization with stormwater infiltration affects the whole catchment water balance, increasing recharge and decreasing evapotranspiration. These changes lead to a rise in the groundwater table and an increase in the probability of groundwater seepage above terrain.