Plants using the C4 photosynthetic pathway have greater water use efficiency (WUE) than C3 plants of similar ecological function. Consequently, for equivalent rates of photosynthesis in identical climates, C4 plants do not need to acquire and transport as much water as C3 species. Because the structure of xylem tissue reflects hydraulic demand by the leaf canopy, a reduction in water transport requirements due to C4 photosynthesis should affect the evolution of xylem characteristics in C4 plants. In a comparison of stem hydraulic conductivity and vascular anatomy between eight C3 and eight C4 herbaceous species, C4 plants had lower hydraulic conductivity per unit leaf area (KL) than C3 species of similar life form. When averages from all the species were pooled together, the mean KL for the C4 species was 1.60 × 10−4 kg m−1 s−1 MPa−1, which was only one-third of the mean KL of 4.65 × 10−4 kg m−1 s−1 MPa−1 determined for the C3 species. The differences in KL between C3 and C4 species corresponded to the two- to three-fold differences in WUE observed between C3 and C4 plants. In the C4 species from arid regions, the difference in KL was associated with a lower hydraulic conductivity per xylem area, smaller and shorter vessels, and less vulnerable xylem to cavitation, indicating the C4 species had evolved safer xylem than the C3 species. In the plants from resource-rich areas, such as the C4 weed Amaranthus retroflexus, hydraulic conductivity per xylem area and xylem anatomy were similar to that of the C3 species, but the C4 plants had greater leaf area per xylem area. The results indicate the WUE advantage of C4 photosynthesis allows for greater flexibility in hydraulic design and potential fitness. In resource-rich environments in which competition is high, an existing hydraulic design can support greater leaf area, allowing for higher carbon gain, growth and competitive potential. In arid regions, C4 plants evolved safer xylem, which can increase survival and performance during drought events.