A conceptual model was tested for explaining environmental and physiological effects on leaf gas exchange in the deciduous dry tropical woodland tree Boswellia papyrifera (Del.) Hochst. For this species we aimed at (i) understanding diurnal patterns in leaf gas exchange, (ii) exploring cause-effect relationships among external environment, internal physiology and leaf gas exchange, and (iii) exploring site differences in leaf gas exchange in response to environmental variables. Diurnal courses in gas exchange, underlying physiological traits and environmental variables were measured for 90 trees on consecutive days at two contrasting areas, one at high and the other at low altitude. Assimilation was highest in the morning and slightly decreased during the day. In contrast, transpiration increased from early morning to midday, mainly in response to an increasing vapor pressure deficit (VPD) and gradual stomatal closure. The leaf water potential varied relatively little and did not influence gas exchange during the measurement period. Our results suggest that the same cause-effect relationships function at contrasting areas. However, leaves at the higher altitude had higher photosynthetic capacity, reflecting acclimation to higher light levels. Trees at both areas nevertheless achieved similar leaf assimilation rates since assimilation was down-regulated by stomatal closure due to the higher VPD at the higher altitude, while it became more light limited at the lower altitude. Gas exchange was thus limited by a high VPD or low light levels during the wet season, despite the ability of the species to acclimate to different conditions.