We tested the hypotheses that responses to the mountain pine beetle fungal associate Grosmannia clavigera will differ between the evolutionarily co‐evolved host lodgepole pine (Pinus contorta var. latifolia) and the naïve host jack pine (Pinus banksiana) and that these responses will be influenced by water availability. G. clavigera inoculation resulted in more rapid stem lesion development in lodgepole than in jack pine; water deficit delayed lesion development in both species. Decreased hydraulic conductivity was observed in inoculated lodgepole pine seedlings, likely because of tracheid occlusion by fungal hyphae and/or metabolite accumulation. Drought but not inoculation significantly impacted bark abscisic acid levels. Jasmonic and salicylic acid were implicated in local and systemic responses of both species to G. clavigera, with salicylic acid appearing to play a greater role in jack pine response to G. clavigera than lodgepole pine. Water deficit increased constitutive levels and/or attenuated induced responses to G. clavigera for several monoterpenes in lodgepole but not jack pine. Instead, inoculation of well‐watered but not water deficit jack pine resulted in a greater number of xylem resin ducts. These findings reveal mechanisms underlying differences in G. clavigera‐induced responses between lodgepole and jack pine hosts, and how water availability modulates these responses. Western North America is currently experiencing the largest mountain pine beetle epidemic in recorded history; in recent years, this destructive forest pest has undergone host range expansion to jack pine, a boreal forest species. We have examined the effect of water limitation on responses of the evolutionarily co‐evolved host lodgepole pine and the naïve host jack pine, focusing on delineating similarities and differences in responses to inoculation with a mountain pine beetle fungal associate, Grosmannia clavigera. These species show different physiological responses to water limitation and that water deficit alters both constitutive and induced defences. Hormone profiles correlate with treatment‐associated differences in induced defences, and hormone crosstalk may modulate the patterns of induced defences that we observed in this study.