Version 5 of the Community Land Model (CLM5) introduces the plant hydraulic stress (PHS) configuration of vegetation water use, which is described and compared with the corresponding parameterization from CLM4.5. PHS updates vegetation water stress and root water uptake to better reflect plant hydraulic theory, advancing the physical basis of the model. The new configuration introduces prognostic vegetation water potential, modeled at the root, stem, and leaf levels. Leaf water potential replaces soil potential as the basis for stomatal conductance water stress, and root water potential is used to implement hydraulic root water uptake, replacing a transpiration partitioning function. Point simulations of a tropical forest site (Caxiuanã, Brazil) under ambient conditions and partial precipitation exclusion highlight the differences between PHS and the previous CLM implementation. Model description and simulation results are contextualized with a list of benefits and limitations of the new model formulation, including hypotheses that were not testable in previous versions of the model. Key results include reductions in transpiration and soil moisture biases relative to a control model under both ambient and exclusion conditions, correcting excessive dry season soil moisture stress in the control model. PHS implements hydraulic gradient root water uptake, which allows hydraulic redistribution and compensatory root water uptake and results in PHS utilizing a larger portion of the soil column to buffer shortfalls in precipitation. The new model structure, which bases water stress on leaf water potential, could have significant implications for vegetation‐climate feedbacks, including increased sensitivity of photosynthesis to atmospheric vapor pressure deficit. Key Points An updated soil‐plant‐atmosphere continuum model based on hydraulic theory is implemented in the Community Land Model (version 5) Prognostic leaf water potential replaces soil matric potential as the basis for stomatal conductance water stress Prognostic root water potential is used to implement hydraulic root water uptake, replacing a “soil wilting point” approach