As forests age, their structure and productivity change, yet in some cases, annual rates of water loss remain unchanged. To identify mechanisms that might explain such observations, and to determine if widely different age classes of forests differ functionally, we examined young (Y, 25 years), mature (M, 90 years) and old (O, 250 years) ponderosa pine (Pinus ponderosa Dougl. ex P. Laws.) stands growing in a drought-prone region of central Oregon. Although the stands differed in tree leaf area index (LAIT) (Y = 0.9, M = 2.8, O = 2.1), cumulative tree transpiration measured by sap flow did not differ substantially during the growing season (100–112 mm). Yet when water was readily available, transpiration per unit leaf area of the youngest trees was about three times that of M trees and five times that of O trees. These patterns resulted from a nearly sixfold difference in leaf specific conductance (KL) between the youngest and oldest trees. At the time of maximum transpiration in the Y stand in May–June, gross carbon uptake (gross ecosystem production, GEP) was similar for Y and O stands despite an almost twofold difference in stand leaf area index (LAIS). However, the higher rate of water use by Y trees was not sustainable in the drought-prone environment, and between spring and late summer, KL of Y trees declined fivefold compared with a nearly twofold decline for M trees and a < 30% reduction in O trees. Because the Y stand contained a significant shrub understory and more exposed soil, there was no appreciable difference in mean daily latent energy fluxes between the Y stand and the older stands as measured by the eddy-covariance technique. These patterns resulted in 60 to 85% higher seasonal GEP and 55 to 65% higher water-use efficiency at the M and O stands compared with the Y stand.