Stand-level competition and local climate influence tree responses to increased drought at the regional scale. To evaluate stand density and elevation effects on tree carbon and water balances, we monitored seasonal changes in sap-flow density (SFD), gas exchange, xylem water potential, secondary growth, and non-structural carbohydrates (NSCs) in Abies pinsapo. Trees were subjected to experimental thinning within a low-elevation stand (1200 m), and carbon and water balances were compared to control plots at low and high elevation (1700 m). The hydraulic conductivity and the resistance to cavitation were also characterized, showing relatively high values and no significant differences among treatments. Trees growing at higher elevations presented the highest SFD, photosynthetic rates, and secondary growth, mainly because their growing season was extended until summer. Trees growing at low elevation reduced SFD during late spring and summer while SFD and secondary growth were significantly higher in the thinned stands. Declining NSC concentrations in needles, branches, and sapwood suggest drought-induced control of the carbon supply status. Our results might indicate potential altitudinal shifts, as better performance occurs at higher elevations, while thinning may be suitable as adaptive management to mitigate drought effects in endangered Mediterranean trees.