Gas exchange, water-use efficiency (WUE), carbon isotope composition (Δ13C) and growth traits were compared among 5 populations of Eucalyptus microtheca F. Muell. Seedlings grown from seed collected across the natural distribution of the species were maintained under water-stressed and well-watered conditions. Gas exchange was measured in terms of net photosynthesis (A) and transpiration (E); WUE was measured in terms of instantaneous water-use efficiency (WUEi) and transpiration efficiency (WUET); growth traits were measured in terms of total biomass (TB), root/shoot ratio (RS), and specific leaf area density (DEN). Significant differences in all traits were detected among the populations. Overall population variation was 1.68–2.50 and 1.48–2.26 μmol CO2 uptake per mmol H2O transpired (WUEi), 1.97–3.04 and 1.64–2.36 g dry matter accumulation per kg water transpired (WUET), and Δ13C was −28.81 to −26.75‰ and −30.56 to −30.04‰ under the water-stressed and well-watered conditions, respectively. In addition, WUEi, WUET and Δ13C were significantly correlated with A, E, RS, DEN and TB. The study indicated that measurement of WUE may be a useful trait for selecting genotypes with improved drought adaptation and biomass productivity under different environmental conditions.