Successful management of forest systems requires a deeper understanding of the role of ecophysiological traits in enabling adaptation to high temperature and water deficit under current and anticipated changes in climate. A key attribute of leaf water relations is the water potential at zero turgor (πtlp), because it defines the operating water potentials over which plants actively control growth and gas exchange. This study examines the drivers of variation in πtlp with respect to species climate of origin and habitat water availability. We compiled a water relations database for 174 woody species occupying clearly delineated gradients in temperature and precipitation across the Australian continent. A significant proportion of the variability in πtlp (~35%) could be explained by climatic water deficit and its interaction with summertime maximum temperature, demonstrating the strong selective pressure of aridity and high temperature in shaping leaf water relations among Australian species. Habitat water availability (midday leaf water potential), was also a significant predictor of πtlp (R2 = 0.43), highlighting the importance of species ecohydrologic niche under a set of climatic conditions. Shifts in πtlp in response to both climatic and site-based drivers of water availability emphasises its adaptive significance and its suitability as a predictor of plant performance under future climatic change.