Gas exchange and water relations were investigated in Nothofagus solandri var. cliffortioides (Hook. f.) Poole (mountain beech) and Nothofagus menziesii (Hook. f.) Oerst (silver beech) seedlings in response to water stress and waterlogging. At soil matric potentials (Psi(soil)) above -0.005 MPa, N. solandri had significantly higher photosynthetic rates (A), and stomatal and residual conductances (g(sw) and g(rc)), and lower predawn xylem water potentials (Psi(predawn)) than N. menziesii. The relative tolerance of plants to water stress was defined in terms of critical soil matric potential (Psi(cri)) and lethal xylem water potential (Psi(lethal)). The estimated values of Psi(cri) and Psi(lethal) were -1.2 and -7 MPa, respectively, for N. solandri, and -0.7 and -4 MPa, respectively, for N. menziesii. Photosynthesis was sustained to a xylem water potential (Psi(xylem)) of -7 MPa in N. solandri compared with -4 MPa in N. menziesii. Following rewatering, both A and Psi(xylem) recovered quickly in N. solandri, whereas the two variables recovered more slowly in N. menziesii. During the development of water stress, nonstomatal inhibition significantly affected A in both N. solandri and N. menziesii. Nothofagus menziesii was more susceptible to inhibition of A by waterlogging than N. solandri. However, the tolerance of N. solandri to severe waterlogging was also limited as a result of a failure to form adventitious roots, suggesting a lack of adaptation to these conditions. The differences in tolerance to water stress and waterlogging between the two species are consistent with the distribution patterns of N. solandri and N. menziesii in New Zealand.