AbstractMixed-species forests are promoted as a forest management strategy for climate change adaptation, but whether they are more resistant to drought than monospecific forests remains contested. Particularly, the trait-based mechanisms driving the role of tree diversity under drought remain elusive.Using tree cores from a large-scale biodiversity experiment, we investigated tree growth and physiological stress responses (i.e. increase in wood carbon isotopic ratio; δ13C) to changes in climate-induced water availability (wet to dry years) along gradients in neighbourhood tree species richness and drought-tolerance traits. We hypothesized that neighbourhood species richness increases growth and decreases δ13C and that these relationships are modulated by the abiotic (i.e. climatic conditions) and the biotic context. We characterized the biotic context using drought-tolerance traits of focal trees and their neighbours. These traits are related to cavitation resistance vs resource acquisition and stomatal control.Tree growth increased with neighbourhood species richness. However, we did not observe a universal relief of water stress in species-rich neighbourhoods. Neighbourhood species richness effects on growth and δ13C did not strengthen from wet to dry years. Instead, richness-growth and richness-δ13C relationships were modulated by climatic conditions and the traits of trees and their neighbours. At either end of each drought-tolerance gradient, species responded in opposing directions during drought and non-drought years.We show that species’ drought-tolerance traits can explain the strength and nature of biodiversity-ecosystem functioning relationships in experimental tree communities experiencing drought. Mixing tree species can increase growth but may not universally relieve drought stress.One-sentence summaryThe drought-tolerance traits of trees and their neighbours determine biodiversity-ecosystem functioning relationships in experimental tree communities.