Eucalyptus globulus Labill., a globally significant plantation species, is grown commercially in a multiple rotation framework. Second and subsequent crops of E. globulus may be established either by allowing the cut stumps to resprout (commonly referred to as coppice) or by replanting a new crop of seedlings. Currently, long-term growth data comparing coppice and seedling productivity in second or later rotations in southern Australia is limited. The capacity to predict productivity using these tools is dependent on an understanding of the physiology of seedlings and coppice in response to light, water and nutrient supply. In this study, we compared the intrinsic (independent of the immediate environment) and native (dependent on the immediate environment) physiology of E. globulus coppice and second-generation seedlings during their early development in the field. Coppice not only grew more rapidly, but also used more water and drew on stored soil water to a depth of at least 4.5 m during the first 2 years of growth, whereas the seedlings only accessed the top 0.9 m of the soil profile. During the same period, there was no significant difference between coppice and seedlings in either their stomatal response to leaf-to-air vapour pressure difference (D) or intrinsic water-use efficiency; CO(2)- and light-saturated rates of photosynthesis were greater in seedlings than that in coppice as were the quantum yield of photosynthesis and total leaf chlorophyll content. Thus, at a leaf scale, seedlings are potentially more productive per unit leaf area than coppice during early development, but this is not realised under ambient conditions. The underlying cause of this inherent difference is discussed in the context of the allocation of resources to above- and below-ground organs during early development.