Abstract Rear‐edge tree populations are experiencing a combination of higher temperatures and more intense droughts that might push individuals beyond their tolerance limits. This trend towards rising atmospheric CO 2 is concurrent with an increase in intrinsic water use efficiency (iWUE), which theoretically enhances photosynthesis and decrease evapotranspiration rates, consequently improving tree resistance to drought. However, it remains unclear whether iWUE is favouring tree growth under current climate conditions, particularly when climate and iWUE legacy effects are simultaneously considered. We evaluated this question with an extensive sampling along Iberian rear‐edge (dry) populations comprising four mountain ranges and two distinct altitudes. We simultaneously examined the effects of climate and iWUE on secondary growth using annually resolved basal area increments (BAIs) for the period 1901–2017. We used linear mixed models including second‐order autocorrelation and 1‐year legacy effects of iWUE and summer drought. BAI and iWUE increased across the studied period. iWUE increase was driven by changes in atmospheric CO 2 concentration and water availability during the growing season. Climate and iWUE exerted direct and lagged effects on beech growth. Water availability during growing season was the main driver of tree growth, combining direct and indirect effects through its impact on iWUE. Legacy effects of water availability and iWUE were more important than growing season conditions. The net effect of iWUE shifted when lagged effects were considered, resulting in a net negative impact on tree growth. Synthesis : Our results reveal that climate and iWUE legacy effects must be considered to assess the net iWUE effect on secondary growth. Considering lagged effects, the current increase in iWUE is constraining tree growth. Modelling efforts of tree growth response to climate warming should include climate and iWUE legacy effects to adequately assess terrestrial ecosystem carbon balance.