Hydrological and carbon cycles are inherently coupled and play a pivotal role in the earth system. Water stress is one of the most limiting factors constraining vegetation productivity in both direct and indirect ways (mainly through nutrition cycling). In this article, we first reviewed the concepts of hydrological and carbon cycles and their interactions and then summarized recent advances in our understanding of how global climate change affects water stress, ecosystem carbon cycling, disturbances, and water use efficiency. A warming climate may continue to benefit plant growth in energy limited areas such as high latitudes and altitudes. However, over many water-limited regions of the world, a warming climate has led to a drying trend, posing negative effects on land carbon sink capability, as shown by reductions in vegetation growth and increases in ecosystem disturbances (wildfires, insect outbreaks, and tree mortality). Carbon cycle and water use efficiency have responded to climate change in different ways in different areas. Further integrating information from climate records, flux measurements at eddy flux towers, and observations from satellites will greatly advance our understanding of the hydrological and carbon cycles and their evolution. Advancement in our understanding of the evolution of hydrological and carbon cycles under the changing climate will help us to adapt and mitigate the adverse effects of climate change. Copyright © 2011 John Wiley & Sons, Ltd.