Responses of leaf conductance (gL) to variation in photosynthetic photon flux density (QP), leaf-to-air vapour pressure difference (VPD), bulk leaf water potential (Psi(x)), and total hydraulic conductance (GT) were examined in silver birch (Betula pendula Roth) with respect to leaf position in the crown. To reduce limitations caused by insufficient water supply or low light availability, experiments were also performed with branchlets cut from two different canopy layers. The intact upper-canopy leaves demonstrated 1.8-2.0 times higher (P<0.001) daily maxima of gL compared with the lower-canopy leaves growing in the shadow of upper branches. In the morning, gL in the shade foliage was primarily constrained by low light availability, in the afternoon, by limited water supply. Leaf conductance decreased when Psi(x) fell below certain values around midday, while the sun foliage experienced greater negative water potentials than the shade foliage. Midday stomatal openness was controlled by leaf water status and temperature, rather than by transpiration rate (E) via the feedforward mechanism. Mean GT was 1.7 times higher (P<0.001) for the upper-canopy foliage compared to that of the lower canopy. At least 34-39% of the total resistance to the water flow from soil up to the shade foliage, and 54% up to the sun foliage, resided in 30-cm distal parts of the branches. Artificial reduction of hydraulic constraints raised Psi(x) and made gL less sensitive to changes in both atmospheric and plant factors. Improved water supply increased gL and E in the lower-canopy foliage, but not in the upper-canopy foliage. The results support the idea that leaves in the lower canopy are hydraulically more constrained than in the upper canopy.