Isohydric and anisohydric regulations of plant water status have been observed over several decades of field, glasshouse and laboratory studies, yet the functional significance and mechanism of both remain obscure. We studied the seasonal trends in plant water status and hydraulic properties in a natural stand of Eucalyptus gomphocephala through cycles of varying environmental moisture (rainfall, groundwater depth, evaporative demand) in order to test for isohydry and to provide physiological information for the mechanistic interpretation of seasonal trends in plant water status. Over a 16 month period of monitoring, spanning two summers, midday leaf water potential (Ψleaf) correlated with predawn Ψleaf, which was correlated with water table depth below ground level, which in turn was correlated with total monthly rainfall. Eucalyptus gomphocephala was therefore not seasonally isohydric. Despite strong stomatal down-regulation of transpiration rate in response to increasing evaporative demand, this was insufficient to prevent midday Ψleaf from falling to levels below −2 MPa in the driest month, well into the region likely to induce xylem air embolisms, based on xylem vulnerability curves obtained in the study. However, even though midday Ψleaf varied by over 1.2 MPa across seasons, the hydrodynamic (transpiration-induced) water potential gradient from roots to shoots (ΔΨplant), measured as the difference between predawn and midday Ψleaf, was relatively constant across seasons, averaging 0.67 MPa. This unusual pattern of hydraulic regulation, referred to here as isohydrodynamic, is explained by a hydromechanical stomatal control model where plant hydraulic conductance is dependent on transpiration rate.