In tall old forests, limitations to water transport may limit maximum tree height and reduce photosynthesis and carbon sequestration. We evaluated the degree to which tall trees could potentially compensate for hydraulic limitations to water transport by increased use of water stored in xylem. Using sap flux measurements in three tree species of the Pacific Northwest, we showed that reliance on stored water increases with tree size and estimated that use of stored water increases photosynthesis. For Douglas-fir (Pseudotsuga menziesii (Mirb.) Franco), water stored in xylem accounted for 20 to 25% of total daily water use in 60-m trees, whereas stored water comprised 7% of daily water use in 15-m trees. For Oregon white oak (Quercus garryana Dougl. ex Hook.), water stored in xylem accounted for 10 to 23% of total daily water use in 25-m trees, whereas stored water comprised 9 to 13% of daily water use in 10-m trees. For ponderosa pine (Pinus ponderosa Dougl. ex Laws.), water stored in xylem accounted for 4 to 20% of total daily water use in 36-m trees, whereas stored water comprised 2 to 4% of daily water use in 12-m trees. In 60-m Douglas-fir trees, we estimated that use of stored water supported 18% more photosynthesis on a daily basis than would occur if no stored water were used, whereas 15-m Douglas-fir trees gained 10% greater daily photosynthesis from use of stored water. We conclude that water storage plays a significant role in the water and carbon economy of tall trees and old forests.