During photosynthesis, respiration and transpiration, gas exchange occurs via the stomata and so plants face a trade-off between maximising photosynthesis while minimising transpiration (expressed as water use efficiency, WUE). The ability to cope with this trade-off and regulate photosynthetic rate and stomatal conductance may be related to niche differentiation between closely related species. The present study explored this as a possible mechanism for habitat differentiation in Iberian columbines. The roles of irradiance and water stress were assessed to determine niche differentiation among Iberian columbines via distinct gas exchange processes. Photosynthesis–irradiance curves (P–I curves) were obtained for four taxa, and common garden experiments were conducted to examine plant responses to water and irradiance stress, by measuring instantaneous gas exchange and plant performance. Gas exchange was also measured in ten individuals using two to four field populations per taxon. The taxa had different P–I curves and gas exchange in the field. At the species level, water stress and irradiance explained habitat differentiation. Within each species, a combination of irradiance and water stress explained the between-subspecies habitat differentiation. Despite differences in stomatal conductance and CO2 assimilation, taxa did not have different WUE under field conditions, which suggests that the environment equally modifies photosynthesis and transpiration. The P–I curves, gas exchange in the field and plant responses to experimental water and irradiance stresses support the hypothesis that habitat differentiation is associated with differences among taxa in tolerance to abiotic stress mediated by distinct gas exchange responses.