A very high percentage (around 70%) of the agronomic area in Switzerland is covered by grasslands at various altitudes where environmental conditions, management, community structure and productivity vary widely. As heat waves and drought are predicted to increase in future climate, survival of plant species in grasslands is a major issue of concern in Central Europe. The effect of summer drought on representative grasslands in Switzerland was studied through drought experiments (using rain-out shelters avoiding natural precipitation) to understand the response of predominant species to changed climatic conditions. The physiological performance (gas exchange, leaf water potential) of selected species was investigated at three locations in Switzerland. The pre-dawn leaf water potential of all species was lower (more negative) under the dryer conditions at the three sites. Net photosynthesis and stomatal conductance of forb and legume species did not show major changes under drought, while grass species showed large decreases at the lowland site. These differences between forb-legume and grass species were not observed at the pre-alpine and alpine site. The apparent drought tolerance of the forb-legume species seems to be due—at least partially—to increased water use efficiency under drought conditions.