In August 1990, a 2-ha plantation was established in an area where rainfall (about 515 mm year(-1)) was insufficient to meet evaporative demand. On nine occasions between September 1991 and April 1993, pressure-volume curves were constructed for irrigated and rainfed Eucalyptus globulus ssp. globulus Labill. and E. nitens (Deane and Maiden) Maiden trees. During the experiment, rainfed trees experienced six periods when predawn water potential was significantly lower than that of irrigated trees. In early spring of 1991 and 1992, osmotic potentials at full turgor and turgor loss point in the irrigated E. nitens were significantly lower than at other times of the year, probably because of winter hardening. Water stress reduced osmotic potential and increased bulk elastic modulus in E. nitens, whereas the reverse occurred in E. globulus. However, treatment differences with respect to changes in osmotic and elastic properties were commonly overshadowed by interspecific differences. These were most apparent at the end of the sixth period of water stress when osmotic potentials at full and zero turgor were significantly higher and bulk elastic modulus and relative water content at turgor loss point were significantly lower in E. globulus than in E. nitens. We conclude that the drought-tolerance responses of E. globulus make it a more suitable species than E. nitens for establishment on sites where moderate water stress is experienced.