Drought-related tree mortality occurs globally and may increase in the future, but we lack sufficient mechanistic understanding to accurately predict it. Here we present the first field assessment of the physiological mechanisms leading to mortality in an ecosystem-scale rainfall manipulation of a piñon–juniper (Pinus edulis–Juniperus monosperma) woodland. We measured transpiration (E) and modelled the transpiration rate initiating hydraulic failure (Ecrit). We predicted that isohydric piñon would experience mortality after prolonged periods of severely limited gas exchange as required to avoid hydraulic failure; anisohydric juniper would also avoid hydraulic failure, but sustain gas exchange due to its greater cavitation resistance. After 1 year of treatment, 67% of droughted mature piñon died with concomitant infestation by bark beetles (Ips confusus) and bluestain fungus (Ophiostoma spp.); no mortality occurred in juniper or in control piñon. As predicted, both species avoided hydraulic failure, but safety margins from Ecrit were much smaller in piñon, especially droughted piñon, which also experienced chronically low hydraulic conductance. The defining characteristic of trees that died was a 7 month period of near-zero gas exchange, versus 2 months for surviving piñon. Hydraulic limits to gas exchange, not hydraulic failure per se, promoted drought-related mortality in piñon pine.