Journal of Ecology published by John Wiley & Sons Ltd on behalf of British Ecological Society.Tree species diversity in forest ecosystems could reduce their vulnerability to extreme droughts through improved microclimate and below-ground water source partitioning driven by contrasting species-specific water use patterns. However, little is known about the seasonal dynamics of belowground water uptake that determine whether diversity positively or negatively impacts tree carbon assimilation and water exchange. Using a network of 30 permanent plots in Mediterranean forests with increasing tree species diversity (from monospecific to four-species mixtures), we examined the seasonal patterns of in-situ aboveground carbon and water relations and belowground water sources on 265 trees from four pine and oak species over 2 years using hydraulic and stable isotope approaches. We found that increasing species diversity in broadleaf and conifer mixtures induced strong soil water source partitioning between oak and pine species. As conditions became drier during the summer in mixed stands, oak species took up water from deeper soil sources, while pines were systematically limited to shallow ones. Despite significant belowground moisture partitioning, stronger drought-induced reductions in photosynthesis, stomatal conductance, and leaf water potential were still observed in diverse compared with monospecific stands for pines but with some benefits for oaks. Synthesis: Our findings reveal that tree species diversity promoted belowground water source partitioning in mixed oak and pine stands, potentially reducing competition for water in more diverse ecosystems. Yet, our results show that it is insufficient to buffer the adverse impacts of severe droughts on aboveground tree carbon and water use, leading to higher water stress, especially for pines.