Plant hydraulic conductance (ks) is a critical control on whole‐plant water use and carbon uptake and, during drought, influences whether plants survive or die. To assess long‐term physiological and hydraulic responses of mature trees to water availability, we manipulated ecosystem‐scale water availability from 2007 to 2013 in a piñon pine (Pinus edulis) and juniper (Juniperus monosperma) woodland. We examined the relationship between ks and subsequent mortality using more than 5 years of physiological observations, and the subsequent impact of reduced hydraulic function and mortality on total woody canopy transpiration (EC) and conductance (GC). For both species, we observed significant reductions in plant transpiration (E) and ks under experimentally imposed drought. Conversely, supplemental water additions increased E and ks in both species. Interestingly, both species exhibited similar declines in ks under the imposed drought conditions, despite their differing stomatal responses and mortality patterns during drought. Reduced whole‐plant ks also reduced carbon assimilation in both species, as leaf‐level stomatal conductance (gs) and net photosynthesis (An) declined strongly with decreasing ks. Finally, we observed that chronically low whole‐plant ks was associated with greater canopy dieback and mortality for both piñon and juniper and that subsequent reductions in woody canopy biomass due to mortality had a significant impact on both daily and annual canopy EC and GC. Our data indicate that significant reductions in ks precede drought‐related tree mortality events in this system, and the consequence is a significant reduction in canopy gas exchange and carbon fixation. Our results suggest that reductions in productivity and woody plant cover in piñon–juniper woodlands can be expected due to reduced plant hydraulic conductance and increased mortality of both piñon pine and juniper under anticipated future conditions of more frequent and persistent regional drought in the southwestern United States. We examined the relationship between plant hydraulic conductance (ks) and subsequent tree mortality using more than 5 years of physiological observations in a piñon pine and juniper woodland subjected to varying degrees of experimental water manipulation. For both species, we observed significant reductions in transpiration, hydraulic conductance, and net photosynthetic carbon fixation under experimentally imposed drought, and we observed that chronically low whole plant ks was associated with greater canopy dieback and mortality for both piñon and juniper. Thus, our data indicate that significant reductions in whole plant ks precede drought related tree mortality events in piñon‐juniper woodland ecosystems subjected to prolonged periods of chronic water stress.