We present a conceptual model linking dry-mass allocational allometry, hydraulic limitation, and vertical stratification of environmental conditions to patterns in vertical tree growth and tree height. Maximum tree height should increase with relative moisture supply and both should drive variation in apparent stomatal limitation. Carbon isotope discrimination (Δ) should not vary with maximum tree height across a moisture gradient when only hydraulic limitation or allocational allometry limit height, but increase with moisture when both hydraulic limitation and allocational allometry limit maximum tree height. We quantified tree height and Δ along a gradient in annual precipitation from 300 to 1600 mm from mallee to temperate rain forest in southeastern Australia; Eucalyptus on this gradient span almost the entire range of tree heights found in angiosperms worldwide. Maximum tree height showed a strong, nearly proportional relationship to the ratio of precipitation to pan evaporation. Δ increased with ln P/Ep, suggesting that both hydraulic limitation and allocational allometry set maximum tree height. Coordinated shifts in several plant traits should result in different species having an advantage in vertical growth rate at different points along a rainfall gradient, and in maximum tree height increasing with relative moisture supply, photosynthetic rate, nutrient supply, and xylem diameter.