Many aspects of plant water use – particularly in response to soil drought – may have as their basis the alteration of hydraulic conductance from soil to canopy. The regulation of plant water potential (Ψ) by stomatal control and leaf area adjustment may be necessary to maximize water uptake on the one hand, while avoiding loss of hydraulic contact with the soil water on the other. Modelling the changes in hydraulic conductance with pressure gradients in the continuum allows the prediction of water use as a function of soil environment and plant architectural and xylem traits. Large differences in water use between species can be attributed in part to differences in their ‘hydraulic equipment’ that is presumably optimized for drawing water from a particular temporal and spatial niche in the soil environment. A number of studies have identified hydraulic limits as the cause of partial or complete foliar dieback in response to drought. The interactions between root:shoot ratio, rooting depth, xylem properties, and soil properties in influencing the limits to canopy water supply can be used to predict which combinations should optimize water use in a given circumstance. The hydraulic approach can improve our understanding of the coupling of canopy processes to soil environment, and the adaptive significance of stomatal behaviour.