Stem water storage capacity and diurnal patterns of water use were studied in five canopy trees of a seasonal tropical forest in Panama. Sap flow was measured simultaneously at the top and at the base of each tree using constant energy input thermal probes inserted in the sapwood. The daily stem storage capacity was calculated by comparing the diurnal patterns of basal and crown sap flow. The amount of water withdrawn from storage and subsequently replaced daily ranged from 4 kg d–1 in a 0·20-m-diameter individual of Cecropia longipes to 54 kg d–1 in a 1·02-m-diameter individual of Anacardium excelsum, representing 9–15% of the total daily water loss, respectively. Ficus insipida, Luehea seemannii and Spondias mombin had intermediate diurnal water storage capacities. Trees with greater storage capacity maintained maximum rates of transpiration for a substantially longer fraction of the day than trees with smaller water storage capacity. All five trees conformed to a common linear relationship between diurnal storage capacity and basal sapwood area, suggesting that this relationship was species-independent and size-specific for trees at the study site. According to this relationship there was an increment of 10 kg of diurnal water storage capacity for every 0·1 m2 increase in basal sapwood area. The diurnal withdrawal of water from, and refill of, internal stores was a dynamic process, tightly coupled to fluctuations in environmental conditions. The variations in basal and crown sap flow were more synchronized after 1100 h when internal reserves were mostly depleted. Stem water storage may partially compensate for increases in axial hydraulic resistance with tree size and thus play an important role in regulating the water status of leaves exposed to the large diurnal variations in evaporative demand that occur in the upper canopy of seasonal lowland tropical forests.